U.S. Markets closed

Why Momo Stock Popped 15.3% in March

Steve Symington, The Motley Fool

What happened

Shares of Momo (NASDAQ: MOMO) climbed 15.3% in March, according to data from S&P Global Market Intelligence, after the Chinese online dating and social video leader announced strong fourth-quarter 2018 results.

To be sure, Momo stock climbed 12% just on March 12, 2019 alone after the company revealed its fourth-quarter revenue had climbed 50% year over year to $559.1 million -- well above its guidance for 43% to 47% growth -- which translated to a better-than-expected 22% increase in adjusted (non-GAAP) net income attributable to Momo to $129.1 million, or $0.59 per American depositary share (ADS).

Stock market chart with a dark blue background indicating gains.

IMAGE SOURCE: GETTY IMAGES.

So what

The underlying drivers of Momo's business were encouraging: Monthly active users for the Momo app climbed 14.3% to 113.3 million, and total paying users of its live video service and value-added service grew nearly 67% to 13 million.

Momo Chairman and CEO Yan Tang called it a "solid quarter," adding, "I am pleased with the progress we made in 2018 in product innovation, monetization, financial performance and the strengthening of the company's position as a leading player in China's open social space."

Now what

Looking ahead to the first quarter of 2019, Momo told investors to expect revenue to increase in the range of 28% to 32% at constant currencies. That's a hefty deceleration from the 50% increase it achieved to end 2018, but most analysts were anticipating first-quarter growth closer to 19%.

In the end, after coupling Momo's fourth-quarter outperformance with its strong guidance -- as well as its propensity for under-promising and over-delivering -- it's clear the stock responded appropriately last month.

More From The Motley Fool

Steve Symington has no position in any of the stocks mentioned. The Motley Fool recommends Momo. The Motley Fool has a disclosure policy.