Chinese stock Hello Group has 55% upside from here: UBS

on Apr 29, 2023
  • UBS analyst upgraded Hello Group Inc to "buy" on Friday.
  • Felix Liu cited several catalysts for his bullish view on "MOMO".
  • Hello Group stock has been in a downtrend since late January.

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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

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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.

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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?

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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.

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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:

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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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