Why Momo Inc. Jumped Another 12% in April

By Seth McNew Markets Fool.com

What happened

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After climbing nearly 30% in March, shares of Momo Inc.(NASDAQ: MOMO)grew another nearly 12% in April, according to data fromS&P Global Market Intelligence. TheChinese company has been pivoting over the past year from a dating app to a true social-media platform -- and it seems to be working.

So what

Momo announced its Q1 earnings in early March, which impressed the market with a 500% jump in sales for the fourth quarter, year over year. Some of the reasons the company was able to post such strong growth include increased monetization of its digital platform, matched by a growing user base, as well as a successful strategic shift toward video streaming. For April, the market seemed to continue increasing the stock's valuation in anticipation of a strong Q1, which will be announced on May 23. After the continual rise in April, the stock is now up nearly 220% over the past year.

Image source: Getty Images.

Now what

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Momo is focused on an incredibly fast-growing market -- the market of Chinese citizens with internet access. Internet penetration in China is still at only about 52% of the 1.4 billion population. However, those 720 million users are nearly 40% more than just five years ago -- and the number is expected to continue rising quickly as mobile devices make it far easier for more and more people to have low-cost internet access.As of the most recent report, Momo had 81 million monthly active users, up from 70 million the year prior, and the company should have plenty of room to grow that number much higher.

Momo shares are not cheap following their huge rise in the past year, trading now at around 50 times earnings. However, as the company continues to grow at astronomical rates, the stock is trading at just 20 times expected next year's earnings. If the company can keep up this growth for a few years, its stock is likely to continue climbing much higher as well.

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Seth McNew has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.