Social networking platform Momo Inc. (NASDAQ: MOMO) has an impressive start this year with the stock up 38%. The Chinese-based firm’s stock has been volatile over the past year like its peers which has been impacted by the ongoing trade war between the US and China. After hitting a new 52-week low of $22.85 in January this year, it has recovered to $32 range in March.

Momo is slated to report its Q4 2018 earnings on March 12 before the bell. The company has a solid track record of surpassing street consensus over the past three years. Hence, investors would be hoping the trend to continue in the fourth quarter as well. For the Q4 period, analysts expected Momo’s revenue to improve 37.9% to $532.82 million.

On the earnings front, street expects a moderate decline of a cent over last year to $0.52. However, going by the history, one can look for a positive surprise on the EPS numbers from the social networking giant. Last quarter, the company has guided Q4 revenues to be in the range of RMB3,655 million to RMB3,755 million, an increase of 43% to 47% over prior year and up 0% to 3% sequentially.

Related: Momo Q3 2018 earnings transcript

The social media app has been witnessing strong growth in terms of key metrics. With the strong brand presence in the most populous nation, Momo’s has still a lot of ground to cover, which is expected to bode well in the near term. Even though the company has been losing steam in terms of growth rate, the basic fundamentals remain intact.

Last year, Momo acquired the dating app Tantan helping it to broaden its reach and engagement across the millennials in the country. This move would bring make young users spent more time on the app which can be better monetized in the coming quarters boosting the top line.

However, Momo needs to make sure it’s keeping a tab on its peers which might launch similar apps in the future. Since the tech industry is disruptive in nature, if users found another better alternative, they would shift in a jiffy, which would dent the company’s margins.

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What to Watch?

Momo’s monthly active users (MAU) saw a 17% jump at the end of September to 110.5 million. Investors would be expecting the growth trend in MAU to continue. One of the key metrics to watch is the paid subscriber count. Last quarter, the company reported 12.5 million subscribers which include the users from the Tantan acquisition.

It’s worth noting that live video services brought in 76% of revenue last quarter to Momo. With more number of users started using the social networking platform, this segment is expected to grow in the next fiscal year. Thanks to strong adoption of virtual gifts from its users, value-added services last quarter surged more than 200% to $84.2 million. Investors would be expecting the trend to continue in the near future with the Tantan deal as more number of users would be interested in virtual gifts.

When it comes to headwinds, the slowing Chinese economy would make a dent on Momo’s growth. If the company is not able to add more users, especially on the live broadcasting side, it would impact the top line. Mobile gaming and marketing revenues would also hurt earnings if the past trend continues in the impending quarter. However, with attractive valuations along with strong track record investors would be hoping Momo to sign off fiscal 2018 in style.

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