What's the Scoop?
Today's decline in Hello Group's share price could be attributed to...
Shares of Hello Group, aka Momo (MOMO 0.34%), took a nosedive of 9.4% on a gloomy Thursday, regardless of its better-than-expected second-quarter 2023 results. The Chinese mobile social and entertainment platform managed to squeeze out a modest 0.9% year-over-year increase in net revenue, reaching $432.7 million, exceeding predictions for a 3.4% decrease. The adjusted earnings per ADS also exceeded expectations, amounting to $0.43, compared to the forecasted $0.35.
So, What's the Big Deal?
While it's a positive that Hello Group recorded its first year-over-year revenue growth since the pandemic started three years ago, it's disheartening that their core Momo app lost about 8% of its total paying users. This drop, from 8.1 million a year ago to 7.9 million, combined with a 30% plunge in monthly active users for their Tantan application, resulted in a 36% decrease in paying Tantan users during the quarter, settling at 1.4 million.
On a brighter note, Hello Group confirmed the repurchase of 12.1 million ADS for $57.2 million under its $200 million share-repurchase plan, approved in June earlier.
The Million-Dollar Question: What's Next?
Hello Group anticipates a 10.3% to 7.2% decline in total revenue for the upcoming third quarter of 2023, much more than the anticipated 5.8% decrease. Given these circumstances and the ongoing user base shrinkage of its core apps, the company has its work cut out for it.
While the enrichment data hints at broader industry trends and challenges for subscription services, it does not provide a clear explanation for Hello Group's expected revenue decline in Q3 2023 or the user base shrinkage of its core apps.
Investing in Hello Group's stocks might be a cautious move due to the anticipated decline in their third-quarter revenue. Despite their recent financial improvements, the company is expected to see a significant revenue decrease, which might impact their future financial performance.
In light of the company's expected revenue decline and shrinkage of its core apps' user base, careful consideration should be given when it comes to allocating funds towards this sector of finance.
