Hello Group Inc. (NASDAQ: $MOMO) is an online services company that offers an array of apps for various social needs. It has interests in social media, film production, and music. It owns apps such as Momo, Tantan, Hertz, Tantan, Duidui, and Tieite, with over 100 million monthly active users, mainly in China and Asia.
Before markets opened on May 28, 2024, Hello Group released its Q1 results for fiscal 2024 to a negative market reception.
Hello Group Releases Q1 Results
The group reported net revenue of RMB2.56.4 million ($354.6 million) for Q1, a 9.2% Y/Y decline, while net income fell to RMB5.2 million ($0.7 million) from RMB390.3 million in Q123.
Hello Group reported a diluted net income per share of RMB0.03 ($0.00), compared to RMB1.96 in Q123, and a non-GAAP diluted EPS of RMB0.31 ($0.04), compared to RMB2.36 last year. Tantan’s paying users declined to 1.1 million in Q124 compared to 1.6 million in Q123.
It reported a decline in monthly active users for Tantan to 13.7 million in March 2024, compared to 19.5 million last year. Its flagship app, Momo, reported a decline in paying users to 7.1 million in Q1 2024 compared to 7.8 million in Q123.
Segment Performance
Hello Group reported a decline in revenue from its Momo segment to RMB2,318.9 million ($321.2 million), compared to RMB2,510.1 million in Q123. The Tantan segment also reported a decline in revenue to RMB241.5 million ($33.4 million), compared to RMB2,510.1 million in Q123.
Other Financial Highlights
Hello Group recorded a 12.4% decline in costs and expenses to RMB2,120.0 million ($293.6 million), compared to RMB2,419.1 million in Q123. Meanwhile, income from operations rose to RMB460.3 million ($63.8 million), compared to RMB436.2 million in Q123.
The company ended Q124 with RMB15,115.8 million ($2.1 billion) in total cash, compared to RMB13,478.5 in the fourth quarter of fiscal 2023. Net cash from operations in Q24 was RMB400.2 million ($55.4 million), compared to RMB451.1 million in Q123.
Hello Group Announces Dividend Payout
In March 2024, the company’s board declined a special cash dividend of $0.54 per ADS or $0.27 per ordinary share. The dividend was paid out on April 30, 2024, for an aggregate total of $98.9 million.
The company also announced the extension of its $200 million share repurchase program announced on June 7, 2022 to June 30, 2026. It also increased the amount available under the program to $286.1 million. As of May 28, 2024, Hello Group had used $122.6 million to buy back shares under the program at an average price of $5.48 per ADS.
Hello Group Issues Q2 Guidance
The group expects net revenue of RMB2.65 billion to RMB2.75 billion in Q224, a 15.5% to 12.4% decline year over year.
Hello Group (MOMO) Stock Performance
After the Q1 results, Hello Group (MOM) stumbled 7.88% to $5.09 during as of 12:15 PM EDT. Over the past five years, MOM has lost 79.98% of its value; in the past 52 weeks, it has lost 32.10%. 2024 has been a tough year for the stock, down 17.98% since the start of the year.
The institutional ownership of MOMO stock remains quite high despite the stock’s decline at 76.38%, which signals institutional confidence in the future of the stock. Additionally, the short interest has declined over the past month from 4.6 million shares to 3.25 million as of May 15, 2024.
One reason for this confidence in the stock could be the company’s healthy balance sheet. Despite revenue and paying membership decline, MOMO still has over $2 billion in liquidity, which positions it well to overcome any headwinds. Additionally, it has a large user base across its apps, which could be leveraged for future revenue generation.
Analysts’ Outlook on MOMO
According to three stock analysts, MOMO has an overall hold rating. They forecast a wide range for the stock, with a high of $16 and a low of $6. The analysts give the stock an average price forecast of $9.47, a 71.56% upside based on its last closing price of $4.52.
Is Hello Group A Good Investment in 2024?
Hello Group has managed to remain relatively stable over the past five years. While it has not experienced huge jumps in revenue, the capital used and returns on capital have been stable. Additionally, the company has been quite generous, paying out respectable dividends to its investors. However, its continued decline is not lucrative to most investors. As such, it may be worth waiting on the sidelines and watching how MOMO continues to perform in the future before plunging into it.
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