Huatai raises Momo stock rating to buy, target to $11.69

Published 03/19/2025, 07:38 AM
Huatai raises Momo stock rating to buy, target to $11.69

Wednesday saw Huatai Financial analysts upgrade Momo Inc . (NASDAQ:MOMO) from a Hold to a Buy rating, with a new price target set at $11.69, up from the previous target of $6.50. This adjustment comes in the wake of Hello Group Inc.’s fourth-quarter 2024 earnings report. According to InvestingPro data, MOMO currently trades at an attractive P/E ratio of 9.18, suggesting potential undervaluation relative to peers.

Hello Group, which is associated with Momo, disclosed a revenue of RMB 2.64 billion for the fourth quarter of 2024. This figure represents a 12.2% year-over-year decline but still manages to slightly exceed the Bloomberg consensus estimate of RMB 2.60 billion. Despite surpassing revenue expectations, the company’s non-GAAP operating profit of RMB 280 million fell short of the Bloomberg consensus of RMB 302 million. InvestingPro analysis reveals the company maintains a healthy gross profit margin of 39% and strong financial health metrics, with 8 additional ProTips available to subscribers.

The reported profit margin stood at 10.62%, which was below the anticipated 11.60%. Huatai Financial attributed the lower-than-expected profit margin to increased marketing expenses aimed at new overseas business channels and higher revenue-sharing incentives on Momo, which were designed to boost the supply of quality content.

Despite the challenges posed by ongoing transformations and macroeconomic pressures, Hello Group has maintained positive profits and operating cash flow. Huatai Financial highlighted this as evidence of the company’s resilience and its ability to generate consistent revenue.

The upgrade in the stock rating to Buy reflects Huatai Financial’s outlook on Momo’s valuation recovery potential. The analysts noted that the current market capitalization of Momo is significantly lower than its net cash, indicating room for the stock’s value to climb.

In other recent news, Hello Group Inc. reported its fourth-quarter 2024 earnings, revealing a mixed performance. The company exceeded revenue expectations with figures reaching 2.64 billion, surpassing the forecast of 2.6 billion. However, earnings per share (EPS) fell short of projections, coming in at 1.3 compared to the anticipated 1.56. Despite the revenue beat, the shortfall in EPS and a decline in non-GAAP net income highlighted ongoing challenges, including macroeconomic pressures and regulatory impacts. Meanwhile, Benchmark analysts maintained a Buy rating on Momo Inc., setting a price target of $13.00, citing the company’s strong financial position and potential for future growth. The analysts noted that while Momo’s fourth-quarter revenue exceeded expectations, profits were impacted by one-time factors. Looking ahead, Momo plans to expand its overseas revenue, with significant growth potential identified in the Middle East and North Africa (MENA) region. Additionally, Momo announced a $50 million special cash dividend and an increase in its share repurchase program by $200 million, further emphasizing its strong cash position.

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