UPDATE: Citi Upgrades Momo Inc. (MOMO) to Buy
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Citi analyst Hillman Chan upgraded Momo Inc. (NASDAQ: MOMO) from Neutral to Buy with a price target of $19.30 (from $16.10).
The analyst comments "Momo’s 4Q20 rev was RMB3.80bn (+1% qoq or -19% yoy), 2%/3% ahead of our/consensus of RMB3.71bn/3.68bn. Adj. net profit was RMB836mn, 33%/35% above our/consensus, driven by better gross margin, opex savings and reverse of over-accrued tax expense. The company guided 1Q21 rev at RMB3.36-3.46bn (3.7%-6.5% yoy decline), with the mid-point 3% above consensus. Current market cap excluding net cash implies 2.5x 2022E P/E, pricing in the continued rev decline. We expect core Momo quarterly live streaming rev to bottom out in 1Q21E and model a qoq recovery starting from 2Q21E (+7%/+3%/+5% qoq for 2Q/3Q/4Q21E). Hence upgrade to Buy/1H on cheap valuation relative to peers and catalyst on core Momo live streaming rev qoq rebound from 2Q21E. We lift SOTP-based TP to US$19.3. Downside risks include 1) decreasing MAU/ user engagement; 2) worse-than-expected regulation limitation on tipping amount."
Shares of Momo Inc. closed at $13.95 yesterday.
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