Markets

Why MOGU Is Crashing 18% Today

What happened

Shares of MOGU (NYSE: MOGU) were sliding 18% in morning trading Monday after the Chinese fashion and lifestyle company reported fiscal first-quarter earnings before the market opened.

So what

It may be a case of "buy the rumor and sell the news," as MOGU's stock soared 60% last week after the company simply announced it would release its earnings report today, yet it did miss revenue estimates for the period.

Arrow trending down hard

Image source: Getty Images.

Now what

The small-cap stock was volatile already, rocketing higher on no news and crashing just as hard in the weeks that followed, but the revenue miss could be giving investors second thoughts.

MOGU said revenue tumbled 47% to 132.5 million renminbi, or $18.8 million, which came up 3% short of analyst forecasts.

Yet it also noted revenue from its live video broadcast (LVB) business. MOGU's chairman and CEO, Qi Chen, said in a statement, "We are highly dedicated to LVB-first strategy and our LVB associated business is now accounted for 72.6% of our total [gross merchandise value] this quarter."

He also said MOGU's relationships with key opinion leaders, who are akin to social media influencers, are MOGU's "most valuable asset," and that they help attract consumers to its LVB. Active buyers through MOGU's LVB grew 37% year over year.

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

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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