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Momo (MOMO) to Report Q3 Earnings: What's in the Cards?

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Momo Inc. MOMO is set to report third-quarter 2020 results on Dec 1.

For third-quarter 2020, revenues are anticipated between RMB3.7 billion and RMB3.8 billion, indicating a decrease of 16.9-14.6% year over year.

The Zacks Consensus Estimate for revenues is pegged at $542.8 million, implying a decline of 12.9% from the year-ago quarter’s reported figure.

The consensus mark for third-quarter earnings stayed at 37 cents per share over the past 30 days. The figure suggests a decrease of 46.4% from the year-ago quarter’s reported figure.
 

Momo Inc. Price and EPS Surprise

Momo Inc. Price and EPS Surprise
Momo Inc. Price and EPS Surprise

Momo Inc. price-eps-surprise | Momo Inc. Quote

 

Notably, the company’s earnings surpassed the Zacks Consensus Estimate in three of the trailing four quarters and missed in the remaining one, the average surprise being 3.6%.

Let’s see how things have shaped up for the upcoming announcement.

Factors to Consider

Momo’s third-quarter revenues are likely to reflect a decline in its core business revenues. Although, it is expected to have benefited from growth in user base owing to the expansion of the company’s product portfolio.

Further, operational and fundamental product changes to shift focus from the top of the pyramid users to the middle layer are expected to have hurt Momo’s live broadcasting revenues.

However, increased user interaction through live game competitions is likely to have aided growth. Further, easing of lockdown in most parts of China is expected to drive recovery and user base expansion for Tantan.

Moreover, the growing momentum of Momo’s new experiences like Heard, a standalone audio dating application and matchmaker, a video dating experience, is expected to have improved the retention ratio in the quarter under review.

Further, Momo added a new Nearby Posts feature on Tantan, which helps users build interactions over content, enhancing the overall dating experience. It is expected to have helped the company attract new customers, thereby driving customer acquisition.

Additionally, the introduction of new mini games into the chat room experience such as Karaoke Show and Friends Trade, in the second quarter, is likely to have driven order growth for the company’s value-added services business in the to-be-reported quarter.

Markedly, value-added service revenues mainly include virtual gift revenues and membership subscription revenues. Total value-added service revenues were RMB1.2 billion ($170.5 million) in the second quarter of 2020, an increase of 27% year over year.

In the second quarter, total paying users of live video service and value-added service, without double counting the overlap and including 3.9 million paying users of Tantan, were 12.8 million compared with 11.8 million in the year-ago quarter, which included 3.2 million paying users of Tantan.
Additionally, a decline in mobile marketing revenues is expected to have continued in the quarter due to prevalent coronavirus-induced headwinds in the overall ad market caused by decreased demand from advertising and marketing customers.

What Our Model Says

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) along with a positive Earnings ESP has a good chance of beating estimates.

Momo has an Earnings ESP of +5.41% and a Zacks Rank #3. You can uncover the best stocks to buy or sell, before they’re reported, with our Earnings ESP Filter.

Other Stocks to Consider

Here are some other companies, which, per our model, have the right combination of elements to deliver an earnings beat in their upcoming releases:

Construction Partners ROAD has an Earnings ESP of +16.02% and is Zacks #2 Ranked. You can see the complete list of today’s Zacks #1 Rank stocks here.

Signet Jewelers Limited SIG has an Earnings ESP of +13.95% and a Zacks Rank of 2.

The Toronto-Dominion Bank TD has an Earnings ESP of +3.63% and a Zacks Rank of 2, at present.

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