HUYA Inc – ADR (NYSE: HUYA) stock rose 8.3% on June 14 Jun, as of 11:35 AM GMT-4; Source: Google finance). Needham analyst Jinjin Qian initiated coverage of the stock with a buy rating and price target of $41. The company came up with IPO in May. Analyst Qian believe Huya is a solid name to own with a robust content ecosystem, strong user metrics, and scalable business model. He considered that HUYA stock valuation is not cheap but due to the company’s leadership position, revenue growth, improving profitability, and monetization upside potential, the stock has an upside. Further, Qian said that China’s live-streaming market for games is expected to reach nearly $5 billion in 2022, from $1.2 billion currently. He added that the company’s 70% one-month retention rate is ahead of what peer companies can boast.
Meanwhile, HUYA stock also rose when the company reported first-quarter revenue of $134.5 million, which is a growth of 111.5% compared with the year-earlier period. Net losses had narrowed to $5.8 million or 79 cents a share and the company posted the adjusted earnings of 6 cents a share.
Moreover, in the first quarter, Live streaming revenues rose by 107.2% to RMB792.8 million (US$126.4 million) in the first quarter of 2018, from RMB382.6 million in the same period of 2017, primarily due to the increase in spending per paying user and the increase in the number of paying users on Huya’s platform. The increase in the number of paying users was primarily due to increased online social activities and diversification of content offerings on the company’s platform and the continuous efforts in converting active users into paying users.
Advertising and other revenues grew by 212.4% to RMB50.8 million (US$8.1 million) in the first quarter of 2018, from RMB16.3 million in the same period of 2017. This significant increase reflected the Company’s continuous efforts to expand the advertising services business that was launched in October 2016.
For the second quarter of 2018, Huya expects the total net revenues to be in the range of RMB970 million to RMB1,000 million, representing a year-over-year growth of 110.2% and 116.7%. In addition, the company expects to have a fair value loss on derivative liabilities of preferred shares amounting to approximately RMB2.3 billion due to an increase in the enterprise value indicated by the price of the initial public offering, which will have impact on the net income attributable to HUYA in the second quarter of 2018.