Hello Group Inc. (MOMO): A Bull Case Theory

Core Thesis - Hello Group Inc. (MOMO) is viewed as a compelling contrarian investment opportunity despite facing near-term regulatory challenges in China [2][4] Financial Performance - As of September 17th, MOMO's share price was $7.73, with trailing and forward P/E ratios of 11.50 and 6.44 respectively [1] - The company reported a 2% year-over-year decline in sales and a loss of $20 million, compared to a net profit of $55 million a year ago [3] - The decline in profits was primarily due to a new tax regime in China, which increased the company's tax burden to approximately 25-30% from previous levels near 20% [3] Cash Flow and Shareholder Returns - MOMO generates significant free cash flow and has historically returned capital to shareholders through dividends and share buybacks [2][4] - Over the past year, the company repurchased around 50 million ADS, reducing its share count by nearly 20%, while maintaining a dividend of $0.30 per share [2] - The intrinsic value of MOMO remains strong, with a book value of $9.22 per ADS, cash of $9.38 per ADS, and net cash of $4.75 per ADS, indicating the stock trades below its net cash-adjusted value [2] Investment Outlook - The combination of strong cash generation, shareholder-friendly capital allocation, and trading below intrinsic value positions MOMO as an attractive investment [4] - If the company returns to historical dividend levels closer to 10% and continues opportunistic buybacks, it offers both income and upside potential with limited downside risk [4]