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Momo (MOMO) to Report Q2 Earnings: What's in the Cards?

Zacks Equity Research
·4-min read

Momo Inc. MOMO is set to report second-quarter 2020 results on Sep 3.

For second-quarter 2020, revenues are anticipated between RMB3.8 billion and RMB3.9 billion, indicating a decrease of 6.1%-8.9% year over year.

The Zacks Consensus Estimate for revenues is pegged at $549.2 million, implying a decline of 9.2% from the year-ago quarter’s reported figure.

The consensus mark for second-quarter earnings moved up a penny to 45 cents over the past 30 days. The figure suggests a decrease of 44.4% from the year-ago reported figure.

Notably, the company’s earnings beat the Zacks Consensus Estimate in all the trailing four quarters, the average surprise being 7.1%.

Let’s see how things have shaped up for the upcoming announcement.

Momo Inc. Price and EPS Surprise

Momo Inc. Price and EPS Surprise
Momo Inc. Price and EPS Surprise

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

Factors to Consider

Momo’s second-quarter revenues and user base are likely to have witnessed a decline. Live video service revenues are expected to have been negatively impacted due to the decline in top of the pyramid paying users.

In the first quarter, total paying users of live video service and value-added service, without double counting the overlap and including 4.2 million paying users of Tantan, were 12.8 million compared with 14 million in the year-ago quarter, which included 5 million paying users of Tantan.
Additionally, mobile marketing revenues in the quarter might have declined due to prevalent headwinds in the overall ad market caused by decreased demand from advertising and marketing customers as a result of coronavirus-led business disruption.

Moreover, decreasing quarterly paying users for mobile games services are expected to have weighed on the company’s top-line growth in the to-be-reported quarter.

Nonetheless, continued growth of the virtual gift business on the Momo application driven by more functions launched and more paying scenarios introduced to enhance the social experience of Momo users, and, to a lesser extent, the increase in the membership subscription revenues of Tantan are expected to have been growth drivers.

Value-added service revenues mainly include virtual gift revenues and membership subscription revenues. Total value-added service revenues were RMB1.1 billion ($166 million) in the first quarter of 2020, an increase of 30% year over year.

The company is expected to have provided its users with enhanced experience, driving revenue growth via gifts cards like Penguin and Gold Miners, and increased user interaction through live game competitions in the quarter under review.

What Our Model Says

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) along with a positive Earnings ESP has a good chance of beating estimates.

Momo has an Earnings ESP of +5.62% and a Zacks Rank #3. 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, have the right combination of elements to deliver earnings beat in their upcoming releases:

Zscaler ZS has an Earnings ESP of +21.74% and is #2 Ranked. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

NIKE, Inc. NKE has an Earnings ESP of +7.32% and a Zacks Rank of 3.

lululemon athletica inc. LULU has an Earnings ESP of +11.77% and a Zacks Rank of 3.

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