SEEKING ALPHA – Mar 7 – Momo has recently acquired dating app Tantan for a combination of 5.3M class A shares as well as $600M in cash. Tantan, the Chinese Tinder, has ~100M users with ~10M being active daily. YY, a competitor to Momo in the live-streaming space, tried to acquire Tantan last year but was unsuccessful. According to multiple reports, it does not appear that the company will try and block the deal either. Over the past two weeks, Momo has received a number of Buy ratings from analysts but despite all the Buy ratings, shares of Momo dropped ~15% the week following the acquisition. The biggest impact could be the company's own press release stating that it was going to release Q4 earnings. A number of investors have focused solely on Momo's live paying users which have remained stagnant at 4.1M quarter-over-quarter. This will likely be a big focus; however, with the recent acquisition of Tantan, investors should not focus solely on this metric as the acquisition of Tantan changes everything. Momo is undervalued as it continues to trade at just 15 times 2018 expected earnings. Seeing as how Match Group is up ~150% over the past 12 months and trades at more than 30 times expected earnings, it's time for Momo to start trading at a premium too.
by Justin Giles
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