Momo 4Q20 results beat on low expectation, with revenue/adj. net profit -19%/-33% YoY, 3%/39% above consensus. 1Q21 rev guidance beat 3%. We expect soft 1Q21E ahead given weak seasonality, while 2Q21E would see gradual pick-up. We are conservative on its short-term recovery pace, given suppressed gifting willingness under COVID-19 challenges and competition from short videos. We cut our earnings forecast by 46%/36% in FY21/22E, and trimmed our TP to US$15.0 by rolling over to FY21E multiple (9x FY21E P/E).
- 4Q20 beat on low expectation. 4Q20 revenue declined 19% YoY, 3% above consensus. Non-GAAP net profit declined 33% YoY, 39% above consensus. Margin beat on higher GPM & lighter S&M. 1Q21E rev guidance came in at -4% to -7% YoY, midpoint 3% above consensus. User metrics soft, with Momo MAU flat QoQ & paying users -2% QoQ/ Tantan paying users -7% QoQ, for disciplined marketing given high TAC in ecommerce seasonality.
- Alert on soft seasonality in 1Q21E. 4Q20 livestreaming rev -31% YoY, while VAS +18% YoY. We forecast 1Q21E to see typically weak seasonality. By platform, we expect Momo’s core rev to decline 13% YoY in 1Q21E (livestreaming -30% YoY), while Tantan +40% YoY with strong VAS to offset weak livestreaming. After livestreaming structural adjustment, momo core livestreaming would gradually pick up in 3Q21E, then flat YoY in 4Q21E, in our view. As such, we expect group rev flat YoY in FY21E, in which momo core livestreaming to see high-teens YoY decline, while VAS +30% YoY.
- New apps to explore opportunities. Tantan’s Mar DAU might surpass Dec level. Despite short-term quarterly volatility, Tantan would still be long-term growth engine. We expect Tantan rev to see low-teens YoY growth in FY21E, with narrowing net loss. In addition, momo will explore new apps (e.g. Hz 赫兹) to unlock monetization upside. Mgmt stated 2021E drivers would derive from: 1) chat room feature innovations; 2) new app & paying scenarios; and 3) content/ feature upgrade for existing business.
- Maintain HOLD. We cut our earnings forecast by 46%/36% in FY21/22E, and cut our TP to US$15.0 (9x FY21E P/E) from US$15.5. Given multiple challenges from COVID-19, regulation and fierce competition, we suggest investors to wait for more clear signals for its reform.
