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YY's Shares Have Fallen Off Too Much

Apr. 12, 2018 3:48 PM ETJOYY Inc. (YY)20 Comments


  • Investors were apparently disappointed by Q4 figures and outlook, as the shares sold off substantially.
  • Growth is indeed slowing down a tad but it is still very solid, and competitive worries are overblown according to management.
  • The company still has numerous expansion opportunities and the shares are fairly cheap.

YY (NASDAQ:YY) is a Chinese life streaming media company where people perform life (a big hit in China) and play games (their Huya platform, which the company is about to spin off).

Fortunes seem to have shifted quite a bit with the share price off considerably the last month:

The shares have given up 40% or so (at the time of writing) since the peak only a month ago. This seems somewhat surprising in the light of fundamental performance:

ChartYY Revenue (TTM) data by YCharts

The company has been growing rapidly on all metrics in the past five years. The stock price seems to have reacted negatively to the Q4 figures, out early March.

It's not entirely clear what caused this investor disappointment:

  • Non-GAAP diluted net income per ADS increased by 45.2% to RMB14.77 or US$2.27, which was a considerable beat by $0.43.
  • Revenues grew by 46% in the quarter and also produced a (slight) beat of expectations.

Yet there are indications of a growth slowdown:

  • Q1 Revenue guidance wasn't particularly strong although management blames this largely on shifting holiday (Chinese Spring festival) dates.
  • The growth in the total paying users is also slowing down with an increase of 25% in Q4 to 6.5M.

We think this is to be expected as a consequence of the law of large numbers and a maturing market with new entrants, but it looks like investors were hoping for a little more.


The company still has significant expansion possibilities:

  • Globally, as live streaming is still in its infancy worldwide. Management is looking at the opportunities, even in the US.
  • New users, for instance, broadening the content to appeal to newer generations, as the company is doing with Happy Go (a casual game collection platform) and Happy Basketball and upcoming Happy Contest.
ChartYY Gross Profit Margin (Quarterly) data by YCharts

ChartYY PE Ratio (TTM) data by YCharts

ChartYY EPS Diluted (TTM) data by YCharts

This article was written by

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Finding the next Roku while navigating the high-risk, high reward landscape

I'm a retired academic with three decades of experience in the financial markets.

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Finding the next Roku while navigating the high-risk, high reward landscape.

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Analyst’s Disclosure: I/we have no positions in any stocks mentioned, but may initiate a long position in YY over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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