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What's in the Cards for Momo (MOMO) This Earnings Season?

Zacks Equity Research

Momo Inc. MOMO is set to report first-quarter 2019 results on May 28.

Notably, the company’s earnings beat the Zacks Consensus Estimate in two of the trailing four quarters and came inline with the same in the remaining quarters, the average positive surprise being 10.49%.

In the last reported fourth quarter of 2018, monthly active users (MAU) on Momo application were 113.3 million compared with 99.1 million in the year-ago quarter.

In fourth quarter 2018, Momo’s earnings of 59 cents per ADS beat the Zacks Consensus Estimate by 5 cents and increased 11.3% from the year-ago quarter. Revenues of $559.1 million surpassed the consensus mark of $540 million and surged 50% on a year-over-year basis.

Momo Inc. Price and EPS Surprise

Momo Inc. Price and EPS Surprise

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

The Zacks Consensus Estimate for first-quarter earnings has remained steady at 55 cents over the past seven days. However, the figure indicates a decline of 20.3% from the year-ago reported figure.

The consensus mark for revenues is pegged at $533.1 million, up 22.5% from the year-ago quarter. Management anticipates revenues between RMB3.55 billion and RMB3.65 billion, indicating an increase of 28-32% year over year.

Let’s see how things are shaping up for the upcoming announcement.

Key Factors at Play in Q1

Momo is expected to witness growth in user base in first-quarter 2019 owing to its innovative strategies and investments.

The company introduced interactive tools, including a new gift card, Penguin Hitting, in the to-be-reported quarter. Apart from the enjoying the special effects of the card, users can also play live games and compete with each other. This is likely to drive the paying user base in first-quarter 2019.

Additionally, Momo’s expansion into other areas like karaoke, short videos, games and other form of audio and video experiences is likely to help the company diversify its offerings from traditional social connect features.

Moreover, increasing use of audio and video interactions compared to text on Momo’s platformis likely to drive user base in first-quarter 2019. Further, this is anticipated to improve monetization opportunities.

This apart, the acquisition of Tantan, which has a dominant position in “China's open social space”, is likely to aid user growth and revenues in the to-be-reported quarter.

User growth is anticipated to be driven by improvement in user experience driven byTantan’s mobile dating platform in China. Moreover, management noted that Value-added service business revenues may exceedother segments in first-quarter 2019.

What Our Model Says

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP.  Sell-rated stocks (Zacks Rank #4 or 5) are best avoided.

Momo has a Zacks Rank #3 and an Earnings ESP of +1.21%. 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 companies, which, per our model, also have the right combination of elements to post earnings beat in their upcoming releases:

Verint Systems Inc. VRNT has an Earnings ESP of +2.94% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Match Group, Inc. MTCH has an Earnings ESP of +2.22% and a Zacks Rank #1.

Twitter, Inc. TWTR has an Earnings ESP of +1.37% and a Zacks Rank #2.

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