YY - Momo dips 3.8% as Morgan Stanley drops to Underweight on weak outlook

Momo (MOMO) is 3.8% lower premarket following a downgrade at Morgan Stanley to Underweight, from Equal Weight. There's deterioration in the company's risk/reward profile suggested by a "weaker than expected recovery after the strategic reform and outlook in 2021, potential regulatory risk, and recent rebound in valuation." MOMO is up 20.5% YTD. The shares had fallen 57% last year due to the removal of some live-streaming features in January 2020, as well as a strategic reform in 2020's third quarter, it notes. The rebound has come on cheap valuation but "we see a weak 2021 outlook." There's core margin risk this year due to negative operating leverage of live streaming and "higher revenue sharing ratios for the new contractual incentive programs for golden broadcasters, and some VAS use cases." It prefers JOYY (YY), which is trading at a similar cheap EV/sales ratio but has cash equivalents making up 72% of

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Momo dips 3.8% as Morgan Stanley drops to Underweight on weak outlook