Overview of the MOMO company
Momo is a Chinese company that makes money on its application of the same name, they also recently own the Tantan application (Chinese Tinder). The share of stocks in my portfolio is ~11%, 27 stocks.
The last update of the highs was in June 2018 (peak - $53.86), current price - $22.3. At first, the stocks fell due to the trade wars between China and the United States, then there was panic due to the virus, thanks to which MOMO is now trading at -60% from the highs.
In terms of revenue and profit dynamics, everything is not bad: the company has been earning steadily since 2016, over 5 years the average annual profit growth is about 50%, but recently margins and growth rates have been falling. According to the latest dynamics report 2019 to 2018: revenue grew by +27%, net profit by a modest +5.5%
Momo has a ridiculous P/E=11, PEG~0.6. Projected data for the 3-year horizon: revenue growth by an average of 10% per year, net profit growth by an average of 15-17% per year.
I keep Momo in my portfolio, I don’t plan to aggressively increase my position, since the growth rate is decreasing and there are more interesting and fast-growing companies. For those who have not bought stocks before, now is a good time to enter, since it seems that the hysteria with the virus, at least in China, is fading away, and there is a high probability of stocks returning to price highs.
And by tradition, a conservative forecast - as always, I give for ~3 years, I expect $50 per share for Momo by the end of 2022, upside to the current price is 125%, ~31% per annum in dollars. The goal is not a take profit, if positive forecasts for profit dynamics continue, I will hold the position.
Attached graphics:
1️⃣ Price dynamics over the past 5 years
2️⃣ Revenue and profit dynamics 2017-2020, then up to 2022 inclusive - forecast values
3️⃣ Dynamics of earnings per share 2018-2020, then up to 2022 inclusive - forecast values
4️⃣ The icing on the cake is Momo’s ownership stocks by investor category. For me personally, the share of insiders here is interesting - 22.3% - quite a lot for a company with a capitalization of several billion dollars, of which 17.84% is owned by the founder Yan Tang. It's a good sign when the CEO retains a majority stake and, more often than not, contributes to good management.
Ideas
March 23, 2020