Chinese social media company Hello Group (NASDAQ: MOMO) stock is down (-34%) over the year despite being profitable. The company operates two major apps, including the social media app MOMO and Tantan, a dating app similar to Tinder. Revenue and user growth have slowed with the spread of COVID vaccinations and drop-in cases in China. Chinese ADR stocks have largely fallen out of favor with investors because their financial data cannot be verified and Chinese regulators can literally take companies out of the market. This has caused valuations to fall significantly, which may reduce some of the risk of owning Chinese stocks for speculators. The company expects a bounce back in his Tantan dating app business as Chinese lockdowns are lifted in the second half of the year. Hello Group has approximately $2.4 billion in both limited and non-limited cash and investments, equivalent to $5.86 cash per share (CPS)† Stocks trade at 5X earnings and still generate $200 in free cash flow. If it sounds too good to be true, remember that there’s a reason it trades so cheaply. Value-oriented speculators the rewards may outweigh the risks if exposure is taken only at opportunistic pullback levels well below $5.86 CPS.
Q1 Fiscal 2022 Profit Release
On June 7, 2022, Hello Group released its first quarter 2022 fiscal results for the quarter ended March 2022. The company reported adjusted earnings per share (EPS) of $0.29 excluding one-time items versus consensus analyst estimates for $0.24, beating estimates by $0.04. Revenues were down (-9.3%) year-over-year (YOY) to $471.9 million, ahead of analyst estimates at $11.4 million. Monthly active users (MAU) fell from $115.3 million in the same period last year from 110.9 million to 110.9 million. Total paying users of live video and value-added services 11 million, down from 12.6 million in Q1 2021. Hello Group CEO Wang Li commented: “Q1 2022 was a challenging but fruitful quarter for us. team was able to focus on our product and operational initiatives to face the headwinds of the resurgence of COVID-19 and related challenges, and get 2022 off to a good start.”
Q2 Fiscal 2022 Guidelines Reduced
Hello Group lowered its revenue forecast for the second quarter of 2022 to reach between RMB 3.05 billion ($455.1 million) to RMB 3.15 billion ($470.08 million) vs. RMB 3.3 billion ($492. 46 million) consensus analysts.
Takeaway for conference calls
CEO Li revised the strategic goals in 2022. For the Momo app, the goal is to stabilize user growth with limited marketing spend and also to pursue growth. He conceived Momo as the “cash cow business”, which they try to keep stable. Tantan is committed to solid growth by improving marketing efficiency and the dating experience. The COVID lockdowns negatively impacted, resulting in a significant drop in users’ dating sentiment and ability to pay for VAS. This has led to a temporary reduction in investments. Going forward, the focus will be on improving marketing efficiency for Tantan as they have cut the marketing budget to reduce net loss during COVID lockdowns which are simply not conducive to live dating or socializing. For Momo, value-added service revenue represented 85% of live streaming volume, growing 21% quarter over quarter. Unfavorable macroeconomic factors caused the recovery after the Chinese New Year to slow down. They plan to continue their conservative operating strategy with a minimal budget for event-related bonuses to stabilize gross margins amid challenging regulations.
MOMO Opportunistic Withdrawal Levels
Using the gun cards on the weekly and daily timeframes provides an accurate playing field overview of the MOMO stock landscape. Weekly Gun Chart Hits Low Near $4.47 Fibonacci (fib) level† The weekly gun chart has a make or break on the 5-period moving average (MA) at $5.38 and 15-period MA at $5.43 as the stochastic mini-pup through the 20 band. The 50-period weekly MA stands at $9.21. The weekly lower Bollinger Bands (BBs) sit at $2.01 and the upper BBs at $10.36. the weekly market structure layer (MSL) buy triggers on a breakout up to $5.73. The daily gun chart has a make or break at the flat MA with 5 periods of $5.23, MA with 15 periods of $5.15 and MA with 50 periods of $5.19. The daily stochastic has a mini pup rising through the 30 band. The daily lower BBs sit at $4.22 and the higher BBs at $6.57. Value speculators can look forward to opportunistic pullbacks at the $4.47 fib, $3.52, $2.50, $1.81 fib and $1.31 fib. Upward trajectories range from the $6.94 fib