DOYU - Momo - Q3'20 Results - Clear Signs Of Deterioration But Tantan Can Turn The Business Around

• Investing in Momo is starting to hurt bad. Its performance is going against the industry trend. Q2'2020 was a mediocre quarter, but COVID impact provided an acceptable excuse.
• Frustratingly, Q3’2020 results worsen. The decline in revenue accelerated by double digits, operating profit cut in half, and management expect Q4 revenue to decline faster in the 20%+ range.
• The only glimpse of hope lies in Tantan; under the circumstances, it performed very well, revenue increased 135% YoY, an acceleration from 73% YoY growth in Q2, and growth in.
• Nevertheless, Momo has moved into our ‘too difficult’ pile. On the one hand, the combined pressure from competition and politics is killing the legacy segments slowly.
• On the other hand, the business is still generating plenty of free cash flow, $300M in the last nine months, and has $2.3B in cash or 80% of the current market cap, $2.8B.

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