Hello Group Inc (NASDAQ: MOMO) ended more than 7.0% up on Friday after a UBS analyst turned super bullish on the social media platform.
Hello Group stock should be worth $12.50
Felix Liu upgraded the Chinese stock today to “buy” and more than doubled his price objective to $12.50 a share that represents about a 55% upside on its previous close.
Hello Group stock has been in a downtrend since late January much of which was related to the company’s weak guidance for Q1. The analyst, however, expects a recovery moving forward on the back of several catalysts including:
Easing year-on-year comparison for the livestreaming business due to regulatory changes on tipping in May 2022 [and] a recovery in offline-dating-related value-added service (VAS) revenue on China’s reopening.
Why else does he like Hello Group stock?
Hello Group is expected to report its first quarter financial results in early June. Consensus is for it to earn 28 cents a share this quarter versus 22 cents per share a year ago.
Other reasons cited for the bullish view on Hello Group stock include cost discipline and lowest multiple versus other internet names that have already turned a profit. Liu said in his research note:
Current price is attractive, considering Hello’s fundamentals are bottoming and its record of returning profit to shareholders (9% dividend yield in 2023E and a US$200m buyback programme to be executed until June 2024.
The stock market news arrives about a month after JPMorgan analyst Daniel Chen also lifted his rating on this Chinese stock to “overweight”.
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