THE MOTLEY FOOL - May 29 - Up over 200% in the past 12 months, Momo is one of the best performing tech stocks out there. The company currently trades at 14x revenue. Any hiccup in the business can send the stock crashing. Here are some of the risks of investing in Momo.
- Government regulation of live streaming
Momo users send virtual gifts as a token of appreciation to content creators. In the early days, that content was often just a peep show, turning Momo into distributors of explicit content. China's Ministry of Culture (MOC) caught on quickly and implemented some restrictions. Additionally, the MOC now requires online streaming platforms to obtain a license from the government. The rules would make it more difficult for new entrants to occupy the streaming space.
- Not the only game in town
YY is with ~$1B in streaming revenue and 152M MAU well ahead of Momo. Additionally, Tencent invested in the broadcasting app Kuaishou, which announced plans to work with Tencent and Baidu on its platform.