As the novel coronavirus (COVID-19) crisis crushes markets worldwide, investors are scrambling to niche sectors that are insulated from the carnage. China's live streaming market, which mainly relies on the country's domestic viewers buying subscriptions and virtual gifts, is arguably one of those safe havens.

Two top stocks in that market are Momo (NASDAQ:MOMO) and Huya (NYSE:HUYA). Momo owns China's top dating apps and a major live streaming platform. Huya, which was spun off from JOYY (NASDAQ:YY) in 2018, owns China's top video game streaming platform.

Both stocks tumbled during the global sell-off, but their fundamentals and forecasts look stable. Let's see if Momo or Huya is poised for a stronger rebound later this year.

A gamer plays a PC game.

Image source: Getty Images.

The key differences between Momo and Huya

Momo's namesake app is a social media platform that offers online dating services, social games, and user-created live video streams. It acquired the smaller dating app Tantan in mid-2018.

Both apps generate most of their revenue from paid subscriptions and sales of virtual gifts, which users can buy for their favorite broadcasters. Momo generates a smaller percentage of revenue from ads and games, but it's pivoting away from those businesses to expand its core dating and streaming features.

Huya hosts live gaming and esports-related streams. It generates most of its revenue from sales of virtual gifts, which are sold as "tips" for top broadcasters. A sliver of its revenue comes from display ads.

How fast are Momo and Huya growing?

Huya's growth clearly outpaced Momo's over the past year, but both companies lost momentum over the past year as their businesses matured.

Revenue growth (YOY)

Q4 2018

Q1 2019

Q2 2019

Q3 2019

Q4 2019

Momo

50%

35%

32%

22%

22%

Huya

103%

93%

94%

77%

64%

YOY = Year-over-year. Source: Company quarterly reports.

Momo's growth was disrupted last summer by a temporary suspension of Tantan from China's app stores and the news feeds of both apps amid allegations of inappropriate ads. Both apps were subsequently restored, but it's been struggling to grow its user base.

Momo's total number of monthly active users (MAUs) on its namesake app rose 1% annually to 114.5 million last quarter. Its total number of paid users grew 6% to 13.8 million. Within that total, Tantan's number of paid users climbed 15% to 4.5 million.

Yet Huya's user base continued expanding at double-digit rates. Huya Live's monthly active users (MAUs) grew 29% annually to 150.2 million last quarter. Its mobile MAUs grew 22% to 61.6 million, as its total number of paid users rose 6% to 5.1 million.

Momo and Huya are both consistently profitable by GAAP and non-GAAP measures. Momo's non-GAAP net income rose 41% to 1.25 billion yuan ($179.9 million) last quarter, and Huya's non-GAAP net income rose 45% to 242 million yuan ($34.7 million).

But what about the coronavirus crisis?

Momo and Huya's fourth quarters both ended before the coronavirus crisis in China escalated into a full-blown pandemic. China locked down major cities during the first quarter, but the infection rates have since slowed down and some businesses have reopened.

A laptop user plays a streaming video.

Image source: Getty Images.

Momo expects its revenue to dip 5%-7% annually in the first quarter as it absorbs that impact. It noted that the outbreak curbed the spending habits of high-paying users, social distancing efforts throttled demand for its dating services, and some adjustments to interactive features on Momo reduced its revenue per user.

IR chief Cathy Peng stated that those headwinds were fierce in February, but that both apps experienced a "gradual recovery" in March as the infection rates waned. Momo expects its growth to improve in the second half of the year.

Huya expects its mobile MAUs to hit a "historical high of over 17 million" during the first quarter, with the winter vacation and lockdown policies acting as temporary tailwinds. It expects its first-quarter revenue to rise 45%-47% annually.

During the conference call, CEO Rongjie Dong stated: "We believe the coronavirus outbreak will be overcome eventually and our path toward future growth prospects will remain intact." Huya's rosy guidance suggests that its core business is better insulated from the coronavirus headwinds than Momo's -- which is ultimately more dependent on real-world social interactions.

The winner: Huya

Momo trades at just 7 times forward earnings, while Huya has a forward P/E of 15. Those valuations are dirt cheap relative to their growth rates. Forward valuations are admittedly shaky right now, due to the evolving coronavirus situation, but both companies generate most of their revenue in China and are barely exposed to macro-sensitive industries like advertising.

Momo is a cheaper stock, but Huya generates stronger growth and is less exposed to macro headwinds. Therefore, I'd stick with the "Twitch of China" instead of the "Tinder of China" throughout this grueling market downturn.