While the Momo app is known as the “Tinder of China,” MOMO stock doesn’t appear to be getting any financial action as it continues to plummet. It seems that everyone is swiping left on this Chinese dating company as its shares have been in a multi-month tailspin and its business continues to shrink.
While it is clear that MOMO has not performing well, what is really behind the tumbling share price and is it on the cusp of rebounding?
How The “Tinder of China” Got Started
Founded in 2011, Hello Group, Inc. is one of China’s largest providers in the mobile, social and entertainment sectors.
The Hello Group company is made up of several mobile applications, the largest being Momo. The Momo app serves as a popular dating app throughout the Republic of China and is even referred to by some as the “Tinder of China.”
Hello Group, Inc. began trading on the New York Stock Exchange, under the stock ticker MOMO, in late 2014. MOMO began trading at around $15 per share.
After a little over two years on the exchange, MOMO ballooned higher by almost 200% to reach nearly $45 per share. MOMO stock hit its all-time high in June 2018, trading around $53 per share.
So what triggered the U-turn in share price?
Unfortunately, for the Hello Group company and its shareholders, revenue has been steadily declining over the last several years. Comparing Hello Group’s revenue from Q1 2022 to Q1 2021, revenue fell 3.2% to 3.67 billion yuan which is equivalent to about $576.6 million.
As of April 2022, MOMO stock sits with a market cap of $1.4 billion and is trading at just over $6 per share. The stock’s 52-week low is $4.47 per share, and its 52-week high is $16.33 per share.
It’s obvious that MOMO stock has been on a downward trajectory, but what’s really behind this stock’s downward trend?
Why Is MOMO Stock Tumbling?
A variety of factors have been contributing to MOMO stock’s downward trajectory. One element that has heavily impacted the company over the last two years has been strict lockdowns in China. But they are not the only factor that have hindered growth. User growth across Hello Group platforms has suffered too.
Along with the Momo app, the Hello Group company also supports the Tantan app. Tantan is another dating app that allows young singles to meet throughout China. Paying members of both the Momo and Tantan apps have fallen significantly over the last year.
One year ago, the company had around 12.8 million paying members. Paying members are now down by 11% as both Tantan and Momo combined have around 11.4 million paying members.
In addition to fewer paying members, MOMO stock has been suffering from China’s aggressive crackdown on technology firms. The new regulatory requirements by the Chinese government have contributed to Hello Group’s mobile marketing revenue plummeting by 51%. On the plus side, Hello Group was able to offset some of these losses through mobile gaming revenue growth.
While Hello Group and other technology companies in China have been suffering, Chinese tech companies may get a needed boost as Beijing has come out and said it would soon end its regulatory crackdown on tech companies and do more to support the companies that are listed on U.S. exchanges.
Will MOMO Stock Be Able to Recover?
Hello Group INC. released its Q4 2021 and Fiscal Year 2021 results during its Earnings Conference Call in late March 2022. Li Wang, the Director and Chief Executive Officer, reported the fourth-quarter earnings. He informed shareholders that overall earnings were down. Wang went on to say, “The decrease was due to the demonetization process to improve user experience and retention.”
Wang also went on to discuss the impact the pandemic has had on the company. He told shareholders, “The sequential decline was due to resurgence (in case figures) and related control measures in various regions in China towards the end of the year. This had a clear negative impact on user social sentiment.”
Despite the poor showing in 2021, Wang and the Hello Group company are hopeful for 2022. Wang went on to say, “We need to continue to enrich our product portfolio… we plan to replicate this model in other apps, although we still have a dozen profitable apps that can take leading positions in niche markets in the next 3 to 5 years.”
Along with expanding their Apps, the Hello Group company is planning to expand into other technology too. Wang told shareholders, “We have been paying close attention to the development of technologies such as 3D rendering, motion capturing, AI, and XR devices, all of which can help enhance social experiences in multiple dimensions.”
Is MOMO Stock a Buy, Sell, or Hold?
While Hello Group executives remain optimistic about the company, the company has many battles it is taking on at the moment. These challenges will likely anchor MOMO stock in the short term.
MOMO’s worsening financial picture, combined with its steady decline over the past year, indicates that it is not a buy right now. However, for long-term investors who already own MOMO, holding this stock may prove wise if the company is able to leverage technology innovations and improve user experiences to maximize lifetime customer value.
For investors who don’t own any MOMO stock, it may be best to wait a while before buying any shares. At around $6 per share, MOMO stock could be a bargain right now if the company is able to recover. However, it would be best to wait on buying until the company can prove that it has what it takes to meet changing demands and expectations within the tech industry and demonstrates a clear turnaround.
A spark is needed to ignite MOMO share price to reach fair market value, which is sitting substantially higher than the current share price at the time of research.
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