Momo Surges as Chinese Social Media Service Posts First Profit

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Momo Inc. surged, erasing the decline it had posted since its December trading debut, after the Chinese mobile social networking service reported its first profit.

The American depositary receipts jumped 27 percent to $16.27 on Tuesday in New York, the biggest rally on record. Trading volume was more than 19 times the daily average of the past three months. The Bloomberg China-US Equity index gained 0.5 percent to 130.99.

Momo, which had plunged as much as 27 percent from its initial public offering price, posted first-quarter net income of $6.7 million, its first profit since operations started in 2011. The company forecast that revenue will increase at least 267 percent in the second quarter after sales more than quadrupled in the prior three months, according to its statement Monday.

“Momo’s profitable quarter was a nice surprise as investors are used to seeing Internet startups lose money in the first few years,” Henry Guo, an analyst at Summit Research Partners, said by phone from San Francisco Tuesday. “Its investor Alibaba is expected to continue supporting Momo as Alibaba doesn’t have its own social media service.”

Alibaba Group Holding Ltd., China’s largest e-commerce operator, owned about 21 percent of Momo’s shares, according to Momo’s annual report filed in April. The company generates revenue from membership subscription fees, online gaming and mobile marketing services that are mainly driven by its partnership with Alibaba and Inc., Momo said in its Monday release.

ETFs Advance

Momo raised $216 million in its IPO in December. The stock slid to as low as $9.82 in early February amid concern the company would struggle to become profitable.

Cheetah Mobile Inc., a mobile-security service company, rallied 16 percent to $34.73, the highest since its IPO last May. Adjusted profit was 77 million yuan ($12.4 million) for the first quarter, which was more than double the average of two analysts’ projections compiled by Bloomberg. Ltd., an online sports lottery operator, surged 30 percent to $21.81 on Tuesday for the largest gain since November 2013. The company said Tuesday that its named Zhengming Pan to replace Man San Law as chief executive officer.

Alibaba’s shares climbed 1.3 percent to $88.21 in New York, taking an advance since its IPO to 30 percent.

Yingli Green Energy Holding Co. tumbled a record 37 percent to 94 cents, the lowest since its 2007 U.S. debut. The solar-panel maker said it’s seeking investors to cope with $2 billion of debt that’s threatening its solvency.

The Deutsche X-trackers Harvest CSI 300 China A-Shares ETF rallied 4.7 percent to $49.32. The iShares China Large-Cap ETF, tracking Chinese companies traded in Hong Kong, gained 1.4 percent to $50.53.

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