Company Reports

We maintain our fair value estimate of TWD 495 per share for momo.com after it reported first-quarter 2024 revenue of TWD 26.9 billion, representing a 7% increase year on year, which was higher than our estimate of 4% growth and on pace to surpass company guidance of 4%. While we are encouraged that e-commerce demand recovered better than expected, we would like to see the positive trend continue for longer, hence we are not materially changing our forecast assumptions. The better-than-expected results were driven by an increase in beauty and healthcare purchases. This led to a 3% decline in the average ticket size to TWD 1,973, but was more than offset by the 11% increase in transactions. We believe this highlights a shift in strategy for momo.com as it moves away from larger-ticket items and toward younger customers.

We lower our fair value estimate for momo.com to TWD 495 from TWD 690 after it reported fourth-quarter revenue of TWD 32.8 billion, which increased only 3% year on year and missed our forecast of TWD 37.8 billion by 11%. This is the second quarter in a row that momo.com has missed its revenue forecast, and the company attributed the shortfall to macro weakness and changing consumer behavior—but for the first time, it also emphasized increasing competition as a greater risk compounding to a headwind. Our lowered fair value estimate reflects slower long-term revenue growth assumptions, as we expect the company's CAGR to expand in the mid- to high-single-digits for 2023-28 rather than the double-digit increase that was anticipated earlier. Our investment thesis remains intact as momo.com continues to enjoy economies of scale with its best-in-class logistics network as Taiwan’s 1P e-commerce leader and should see operating margin expansion as it further improves its operating efficiency. Momo.com offers a modest dividend yield of 3% currently, and we believe the shares are fairly valued given the lesser upside and lower revenue trajectory. We think share price performance will be driven by the indication of greater consumption demand ahead.

We expect Momo.com to maintain its leading market share in Taiwan’s business-to-consumer, or B2C, direct sales e-commerce industry, due to a sizable lead in logistics infrastructure among peers that has indirectly led to more users, better convenience, and a higher operating margin than its closest peer. Momo.com is leveraging its logistics advantage and convenience as its long-term strategy and plans to building out two more major distribution centers by 2025, which should further differentiate its service between not only online competition but also brick-and-mortar retailers. The company is also adding new livestreaming and third-party, or 3P, platforms to its business, which could also further add incremental users.

We maintain our fair value estimate of TWD 690 for momo.com after it reported third-quarter revenue of TWD 25.1 billion, which represents a 6% year-on-year increase, but fell 10% short of our forecast due to macroeconomic softness. However, we believe our investment thesis remains intact as momo.com continues to position itself as the market leader in Taiwan’s e-commerce retail industry and should see operating margin expansion as it improves its operating efficiency and adds more users in Taiwan’s less-saturated e-commerce market. In general, retail demand was weak across the board, but in particular across the sports and leisure, fashion and luxury, and home appliance categories. Despite macroeconomic headwinds in the third quarter that caused momo.com to miss our forecasts, we believe that the entire retail industry also saw muted demand. However, momo.com fared much better than its peers as we estimate its online e-commerce market share increased by 80 basis points to 23.9% year on year. We expect momo.com’s convenience and speed, a result of its differentiated logistics network, to attract consumers to the platform in the long term. With 24% upside to our fair value estimate, we believe that the current entry point is attractive given the company should continue to see growth and margin expansion. We also believe that momo.com remains an appealing option for investors looking for a modest dividend yield of 3%.

We expect Momo.com to maintain its leading market share in Taiwan’s business-to-consumer, or B2C, direct sales e-commerce industry, due to a sizable lead in logistics infrastructure among peers that has indirectly led to more users, better convenience, and a higher operating margin than its closest peer. Momo.com is leveraging its logistics advantage and convenience as its long-term strategy and plans to building out two more major distribution centers by 2025, which should further differentiate its service between not only online competition but also brick-and-mortar retailers. The company is also adding new livestreaming and third-party, or 3P, platforms to its business, which could also further add incremental users.

We initiate Momo.com with a fair value estimate of TWD 760, representing a 20% upside as of the Aug. 1 close. We believe the direct sales e-commerce company has a sizable lead in its logistics capabilities that has boosted users and lifted operating margins compared with its closest competitor in Taiwan. Momo.com’s logistics advantage lies mainly in its distribution network that incorporates 60 warehouses and 800 other delivery kiosks. In addition, it plans to add two more distribution centers in southern Taiwan in addition to its northern hub, which should further solidify its logistic capabilities in all parts of the island. Comparatively, its closest competitor PChome, had only eight operating warehouses as of year-end 2022. We believe the firm is leveraging its advantage by offering lower prices to consumers relative to its competitors and we believe it is positioned for higher gross margins if discounting ceases. We assume scale efficiency leads to a modest operating margin expansion of 100 basis points in the long term.

We expect Momo.com to maintain its leading market share in Taiwan’s business-to-consumer, or B2C, direct sales e-commerce industry, due to a sizable lead in logistics infrastructure among peers that has indirectly led to more users, better convenience, and a higher operating margin than its closest peer. Momo.com is leveraging its logistics advantage and convenience as its long-term strategy and plans to build out two more major distribution centers by 2025, which should further differentiate its service between not only online competition but also brick-and-mortar retailers. The company is also adding new livestreaming and third-party, or 3P, platforms to its business, which could also further add incremental users.