MOMO - Momo Inc.

[Longnose]

Anyone else on this board ever look at MOMO?

 

What are your thoughts?

 

MOMO is the considered the Chinese equivalent of Tinder. Though there are a lot of similiarities between MOMO and Tinder they are definatly quite different. Much of MOMO's revenues are made from live streaming video services. MOMO also owns the new upcoming Chinese dating app TanTan. Which are still growing YoY from what I understand.

 

When I look at this company from a quantitative investment it seems very attractive. Assuming that China is reporting real numbers (always a risk).

 

Just curious if anyone else has looked at it and has any other insights or thoughts about it.

 

[Arski]

I held it but couldn't find confidence in Momo getting their revenue back up because I thought they didn't have a moat and would lose to competitors.

 

Still, I could be wrong though.

[Green King]

there is no way to know if any of the revenues and earnings in these companies are real.

[Lollapalooza]

I was attracted to this stock by its strong cash generation ability, high reserves and increasing 'open-mindset' and cultural shift of young Chinese. I hold this stock.

 

Currently Momo inc. is trading close to their net cash value and the Momo app keeps on printing cash through live streaming events and in-app purchases. This is the cash cow of Momo inc. but does seem to appeal less to younger generations.

 

In truth revenue growth of Momo app has flattened, although what could one expect in an era of covid lockdowns and restricted social interactions for a "dating app"?

 

Tanban acquisition (aka Chinese tinder) was outrageously expensive and has yet to bear fruit. This is the main growth story of the company and its attempt to tap into the younger chinese population. Revenues keep growing but it's still cash destructive.

 

Personally i find my margin of safety on their high cash position and continuous cash generation ability from their established user base. I also like the the potential growth possibilities coming from Tanban once covid is behind us.

Although as with all apps, it's hard to argue that there are high switching costs and that a new / fancier player cant bite their share, so i cant see a moat.

 

The founder a ex-CEO as recently left Momo. He has successfully made Momo into a cash generating machine, very profitable but perhaps at the expense of stronger growth. In today's market unfortunately no one seems to care about profitability, the high-growth story is really what drives those PE multiples up. So its no wonder that the stock price has underperformed.

 

The new CEO comes with a somewhat different vision. His focus seems to be more on driving growth than profitability. He is scrapping out the previous business model, shaking their monetization policy for established content creators in an attempt to drive new users into the platform.

As with all turnaround stories, one has to wait and see.

 

Curious to hear other investors views.

[Peregrine]

I've read that this app was formerly used widely for hook-ups and later prostitution which made the government come down hard on it. Wonder how it makes money through videos now. Looks like there's also plenty of dating apps in China as well. Anyone know who the clear winners are?

[Longnose]

The founder a ex-CEO as recently left Momo. He has successfully made Momo into a cash generating machine, very profitable but perhaps at the expense of stronger growth. In today's market unfortunately no one seems to care about profitability, the high-growth story is really what drives those PE multiples up. So its no wonder that the stock price has underperformed.

 

The new CEO comes with a somewhat different vision. His focus seems to be more on driving growth than profitability. He is scrapping out the previous business model, shaking their monetization policy for established content creators in an attempt to drive new users into the platform.

As with all turnaround stories, one has to wait and see.

 

Curious to hear other investors views.

 

@Lollapalooza thanks for your insights. I too find my margin of safety in the large cash position that MOMO holds. I like these insights into the ex-CEO and current CEO. I dont have much insight here. Can I ask where you learned these insights? Management makes such a difference in these weak moat companies. I do think TanTan has a good growth story and could start to show fruit in the future as well. I guess only time will tell. I do think they are being quite prudent with the cash and trying to make wise decisions.

 

I've read that this app was formerly used widely for hook-ups and later prostitution which made the government come down hard on it. Wonder how it makes money through videos now. Looks like there's also plenty of dating apps in China as well. Anyone know who the clear winners are?

 

@frank87 - That did happen but I believe it has mostly blown over and MOMO took corrective action to try to make sure that they are not perceived this way. Honestly, Tinder was perceived this way here in the US as well. Also, MOMO is much more of a live streaming app than it is a dating app. At least most of its revenues are derived from live streaming.  TanTan (which is the new growth story) is much closer to Tinder than MOMO is.

[Lollapalooza]

Can I ask where you learned these insights? Management makes such a difference in these weak moat companies. I do think TanTan has a good growth story and could start to show fruit in the future as well. I guess only time will tell. I do think they are being quite prudent with the cash and trying to make wise decisions.

Earnings call transcripts. I've been following the company for a while now so at least that has been my interpretation.

Suggest you check out the latest one (Q3 2020) to get a glimpse of the new CEO's vision.