China's Hello Group Q3 revenue dips

Overview

• Social networking firm Hello's Q3 revenue declined 0.9% yr/yr to RMB 2,650.1 mln (US$372.3 million)

• Net income attributable to Hello Group fell to RMB 348.9 mln from RMB 449.4 mln

• Company repurchased 54.7 mln ADSs for US$341.6 mln under share repurchase program

Outlook

• Hello Group expects Q4 net revenues between RMB2.52 bln and RMB2.62 bln

• Company anticipates overseas business to drive future revenue growth

Result Drivers

• OVERSEAS GROWTH - Revenue from overseas increased by 69% due to expansion of social entertainment and dating brands, particularly in the MENA region

• WEAK CONSUMER SENTIMENT - Decrease in value-added service revenues due to weak consumer sentiment on Momo app and decline in Tantan's paying user base

• INCREASED COSTS - Rise in costs due to higher revenue sharing and commission fees for overseas apps, and increased amortization of intangible assets

Key Details

Analyst Coverage

• The current average analyst rating on the shares is "buy" and the breakdown of recommendations is 7 "strong buy" or "buy", 1 "hold" and 1 "sell" or "strong sell"

• The average consensus recommendation for the software peer group is "buy"

• Wall Street's median 12-month price target for Hello Group Inc is $9.35, about 34% above its December 9 closing price of $6.98

• The stock recently traded at 6 times the next 12-month earnings vs. a P/E of 7 three months ago

Press Release: ID:nPn4V5Smta

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