It's been a sad week for Momo Inc. (NASDAQ:MOMO), who've watched their investment drop 11% to US$14.45 in the week since the company reported its full-year result. It looks like a credible result overall - although revenues of CN¥15b were in line with what the analysts predicted, Momo surprised by delivering a statutory profit of CN¥9.65 per share, a notable 16% above expectations. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.
Taking into account the latest results, Momo's 17 analysts currently expect revenues in 2021 to be CN¥15.3b, approximately in line with the last 12 months. Statutory earnings per share are expected to descend 17% to CN¥8.35 in the same period. Yet prior to the latest earnings, the analysts had been anticipated revenues of CN¥15.4b and earnings per share (EPS) of CN¥8.74 in 2021. So it looks like there's been a small decline in overall sentiment after the recent results - there's been no major change to revenue estimates, but the analysts did make a small dip in their earnings per share forecasts.
The consensus price target held steady at CN¥124, with the analysts seemingly voting that their lower forecast earnings are not expected to lead to a lower stock price in the foreseeable future. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. Currently, the most bullish analyst values Momo at CN¥31.61 per share, while the most bearish prices it at CN¥14.49. Even so, with a relatively close grouping of estimates, it looks like the analysts are quite confident in their valuations, suggesting Momo is an easy business to forecast or the the analysts are all using similar assumptions.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Momo's past performance and to peers in the same industry. We would highlight that Momo's revenue growth is expected to slow, with the forecast 1.6% annualised growth rate until the end of 2021 being well below the historical 36% p.a. growth over the last five years. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 16% annually. Factoring in the forecast slowdown in growth, it seems obvious that Momo is also expected to grow slower than other industry participants.
The Bottom Line
The most important thing to take away is that the analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. On the plus side, there were no major changes to revenue estimates; although forecasts imply revenues will perform worse than the wider industry. The consensus price target held steady at CN¥124, with the latest estimates not enough to have an impact on their price targets.
Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. At Simply Wall St, we have a full range of analyst estimates for Momo going out to 2023, and you can see them free on our platform here..
We don't want to rain on the parade too much, but we did also find 2 warning signs for Momo that you need to be mindful of.
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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