According to analysts at The Motley Fool, a delayed reaction to positive Q1 financial results is the reason why Momo stock climbed so rapidly during June.
Share prices grew by approximately 30% during the month, despite the Chinese dating company facing pressure for violating a number of compliance policies.
These controversies are perhaps what caused potential investors to initially be wary about getting involved, even after the better-than-expected results. Net revenues grew 35% year-on-year to over $550 million, which was aided by Momo serving 14 million premium members.
Stock prices grew briefly by 7.5% when the results were initially released, before immediately beginning to fall back down.
Momo stock is currently sitting at $34.46 with a market cap of $7.16 billion.
The company first ran into difficulties at the start of May, when subsidiary Tantan was removed from major Android stores for featuring promotional content for prostitutuion services.
Investors reportedly hired a private law firm to investigate Momo’s business procedures. Since then, a class action lawsuit was filed against the company for allegedly making false and misleading statements regarding its business, operational and compliance policies.
Tantan was added back to app stores at the beginning of July once the internal review was completed, but the current legal proceedings are still ongoing.
Keith Noonan wrote for The Motley Fool: “Momo has a leading position in China’s online dating market, and strong engagement for its video-based service suggest that the company could still have a long runway for growth if it can successfully navigate regulatory challenges in the Chinese market.”
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