Why Shares of The Meet Group, Inc. Rallied 26% in August

What happened

Shares of The Meet Group, Inc. (NASDAQ: MEET) were surging last month after the social media and online dating specialist posted a strong second-quarter earnings report and launched a new live-streaming platform. As a result, the stock finished August up 26%, according to data from S&P Global Market Intelligence.

As you can see from the chart below, the stock got a modest boost from the earnings report at the beginning of the month, but didn't really take off until the company launched Quick, a new one-on-one livestreaming platform, on Aug. 21:

So what

Meet Group, which owns apps including MeetMe, LOVOO, and Skout, posted another round of strong growth in its earnings report on Aug. 1; revenue jumped 37% to $42.8 million, beating estimates of $38.3 million. Video and advertising continued to propel the company's top-line growth.

CEO Geoff Cook explained in a statement:

Adjusted earnings per shares fell by a penny to $0.08, but that still topped expectations of $0.06. Meet Group also issued solid guidance: It's calling for revenue of $43 million to $44 million for the current quarter, up 35% from a year ago, and sees full-year revenue of $166 million to $168 million, also a 35% increase.

Despite the strong numbers, the stock initially fell on the news, dropping 4.4% the day it came out. However, shares quickly rebounded over the following days. The stock kicked off another rally on Aug. 21 as Meet Group launched Quick, a new one-on-one live chat for MeetMe users; the company said that live-streaming had reached an annual run rate of $42 million, or about a quarter of total revenue.

Now what

Meet Group has been following a playbook similar to China's Momo (NASDAQ: MOMO), an online social media and dating site that has seen blowout growth lately, led by live-streaming. Like Meet Group, Momo's shares also popped last month. Cook said, "We've seen MOMO successfully pair livestreaming with dating in China, and since 2016, we've been bringing this model to Western audiences."

Like Momo, Meet Group has been highly volatile in recent years, but its live-streaming strategy seems to be paying off. Keep your eye on top-line growth in the quarters ahead, to see if its momentum will continue.

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Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool recommends Momo. The Motley Fool has a disclosure policy.