Hello Group (NasdaqGS:MOMO): Assessing Valuation After Q2 Losses and Cautious Revenue Outlook

If you own or are watching Hello Group (NasdaqGS:MOMO), this latest earnings announcement is bound to spark questions about where the stock goes from here. The company posted a net loss for the second quarter and reported revenue that slipped year over year, a reversal from its prior profitability. Guidance for the next quarter points to stable or slightly lower revenues, signaling that operational headwinds remain in play for now. Looking at the bigger picture, Hello Group’s share price has moved higher so far this year, but performance over the past three months is in the red and reflects shifting sentiment as growth expectations are reset. These results follow a period where net income was steadily rising, but the recent swing to a loss and cautious outlook underscore a change in market perception. Recent share repurchases have been a positive; however, the immediate focus remains on whether the company can reignite growth. With momentum fading and near-term prospects a bit cloudy, the question for investors is straightforward: Is the current stock price undervaluing future recovery potential or simply pricing in stagnant growth for the foreseeable future?

Most Popular Narrative: 22.3% Undervalued

The most widely followed narrative sees Hello Group as significantly undervalued, pricing in far less optimism than consensus expects. This view is shaped by expectations about growth, margins, and future earnings power.

“Hello Group's overseas expansion, primarily through the app Soulchill and the launch of two new apps, Yaha Live and Amarr, is expected to drive significant revenue growth and long-term profitability by entering new international markets and enhancing global presence. This expansion is likely to positively impact revenue and potentially net margins as the company scales efficiently.”

What is the driving force behind that bold price target? The answer lies in the combination of sustained revenue growth, ambitious profit targets, and a calculated bet on expanding well beyond China’s borders. Interested in which assumptions tilt the value in Hello Group’s favor? The narrative puts the spotlight on a powerful set of growth levers and a shifting global strategy. Read the full analysis to see the numbers behind this undervalued call.

Result: Fair Value of $9.68 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, persistent declines in Momo app revenue and higher costs from overseas expansion could present challenges for Hello Group’s path to achieving a sustained turnaround.

Find out about the key risks to this Hello Group narrative.

Another View: Discounted Cash Flow Perspective

While analyst price targets suggest Hello Group shares are undervalued, our DCF model also points toward the stock trading below its fair value, even when factoring in future uncertainties and slower forecast growth. Could the market be missing something, or is caution still the right move?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Hello Group for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Hello Group Narrative

If you see things differently or want to dive deeper into the numbers, it's easy to craft your own perspective on Hello Group in just a few minutes. Do it your way.

A great starting point for your Hello Group research is our analysis highlighting 3 key rewards and 2 important warning signs that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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