Hello Group ( NASDAQ: MOMO ) shares rose in premarket trading on Friday as Morgan Stanley upgraded the Chinese online social networking platform, noting it is a "non-consensus" beneficiary to China's reopening.
Analyst Alex Poon raised his rating on Hello Group ( MOMO ) shares to overweight from equal-weight, point out that although the core business is a "cash cow," its other areas, such as value-added services, its Tantan app, new apps and increased cost discipline are helping to drive a "profit growth inflection" next year and in 2024.
Poon also explained that the stock is trading at a negative enterprise value and at just 6 times estimated 2022 earnings, with a 15% free cash flow yield and 9% dividend yield.
"Hello Group has been expanding its portfolio of online social/dating apps targeting different demographics and geographies, and some of these have begun to bear fruit," Poon wrote in a note to clients, adding that Tantan's loss narrowed in the third-quarter and could break even next year.
The analyst also noted that three of the company's new apps, Hezi, Duidui, and SoulChill, became profitable in the company's most recent quarter. He also noted Hello Group's ( MOMO ) revenue mix continued to improve, with overseas revenue now at roughly 5% and sales from non-Momo core apps was between 15% and 20%.
Hello Group ( MOMO ) shares soared on Thursday after it reported third quarter results that exceeded analysts estimates .
Analysts are largely cautious on Hello Group ( MOMO ). It has a HOLD rating from Seeking Alpha authors , while Wall Street analysts rate it a BUY . Conversely, Seeking Alpha's quant system, which consistently beats the market, rates MOMO a HOLD .
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Hello Group rises as Morgan Stanley upgrades on China reopening