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Why Hello Group Stock Was Jumping Again Today


What happened

Shares of Hello Group (MOMO 31.52%) were moving higher today for the second day in a row as investors continued to cheer a strong third-quarter earnings report from the Chinese online dating company and as it got an analyst upgrade this morning.

As of 2:56 p.m. ET, Hello Group stock was up 32.2% on the day after gaining 29.3% yesterday. 

So what

Revenue at Hello, which owns popular online dating sites like Momo and Tantan, actually declined 14% in the second quarter to $454.5 million as the company has faced headwinds from the COVID-19-related lockdowns in China, but that still beat estimates at $449.5 million.

On the bottom line, adjusted earnings per share fell slightly to $0.37, but that also beat expectations at $0.31.

This morning, Hello Group also got some cheers from analysts as Morgan Stanley‘s Alex Poon raised the stock’s rating from equal weight to overweight, saying it looked like it would be a beneficiary from the reopening in China. The analyst also believes the business has stabilized following a restructuring of its livestreaming business and raised the stock’s price target from $5 to $9.

Additionally, Citigroup raised its price target from $5.80 to $7, and analyst Brian Gong called the recent results “decent,” noting that cost controls were a factor in the outperformance.

Now what

While Hello’s sales and profits are still moving in the wrong direction, the signs of reopening in China are encouraging, and the stock is down by 75% from where it was before the pandemic started, giving it plenty of room for a recovery.

Though management called for another double-digit revenue decline in the fourth quarter, if the reopening continues, the stock is likely to move higher.

Citigroup is an advertising partner of The Ascent, a Motley Fool company. Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool recommends Hello Group. The Motley Fool has a disclosure policy.



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