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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.


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.

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