MOMO: Higher Future Margins Will Support A Stronger Outlook

Analysts have trimmed their price target on Hello Group by approximately $0.93. This reflects expectations for slower revenue growth, partially offset by improving profit margins and a slightly lower discount rate.

What's in the News

• Hello Group issued fourth quarter 2025 guidance, projecting total net revenues between RMB 2.52 billion and RMB 2.62 billion, a decline of 4.4% to 0.6% year over year (company guidance).
• The company emphasized that its revenue outlook reflects current market and operational conditions. It also noted that these assumptions may change as the quarter progresses (company guidance).
• Hello Soju launched its first premium small batch soju spirit, crafted from non GMO sticky rice in Northern California and distilled using traditional Korean methods to target the growing U.S. soju and cocktail market (product announcement).
• The new Hello Soju Premium Soju Spirit, bottled at 66 proof, is positioned as a versatile option for sipping, shots, and cocktails. It will roll out across select California and Nevada retailers and Tao Group venues starting fall 2025 (product announcement).

Valuation Changes

• The fair value estimate has fallen modestly from 13.07 to 12.14, implying a slightly lower intrinsic valuation for Hello Group shares.
• The discount rate has declined slightly from 9.50% to 8.95%, reflecting a marginally lower perceived risk profile or cost of capital.
• Revenue growth expectations have been reduced significantly from about 4.78% to 1.79%, indicating a more cautious outlook on top line expansion.
• The net profit margin forecast has risen meaningfully from roughly 11.04% to 12.88%, suggesting improved anticipated profitability despite slower growth.
• The future P/E multiple has edged down slightly from 11.92x to 11.42x, pointing to a modest compression in the valuation multiple applied to future earnings.