Last week, Seeking Alpha analyst Birgir Magnusson labelled Momo stock as “undervalued”, despite the Chinese dating company’s tumultuous past couple of months.
The statement was made after Momo released a positive Q1 financial report which saw total revenues increase by 35% year-on-year. However, the stock growth did not mirror the revenue growth, largely due to investors being tentative around the recent controversies.
Issues started at the end of April when Tantan was removed from several major Android stores for uncited policy violations, believed to be triggered by the Chinese government.
Momo had been in the process of monetising Tantan further, the popular dating app accounted for approximately 8% of the company’s overall Q1 revenues.
The government then continued to tighten its controls on internet regulations and pressured the user-generated newsfeeds on both Momo and Tantan to be shutdown. Following an extensive review of the content-screening processes, the features are scheduled to be live again today.
The final setback came three weeks ago when a class action lawsuit was filed on behalf of anyone who had purchased Momo stock in the past four years. The plaintiff claimed it had continually made false and misleading statements, in particular regarding its compliance policies.
Magnusson noted that Momo shares are worth considering as it is a fast-growing company and available at a relatively low price. Even so, he did admit that potential investors should wait until the government ban was fully lifted before buying.
The stock price currently sits at $31.57, a 9% increase since the article was first published. Magnusson does believe it will continue to grow to $42, once the issues have been shaken off, and he doesn’t see anything stopping the price from maybe reaching $50-$55 in the near future.
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