Why HUYA Inc – ADR (NYSE: HUYA) stock is correcting

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HUYA Inc – ADR (NYSE: HUYA) stock fell over 11.1% in the last week (November 11th– November 18th, 2019; Source: Finviz.com). For the fourth quarter of 2019, the company expects total net revenues to be in the range of RMB2,340 million to RMB2,420 million, which reflects a year-over-year growth in the range of 55.5% and 60.8%, which is slower than the earlier quarter.

The company in the third quarter of FY 19 has reported 77.4% rise in the total net revenues to RMB2,265.1 million (US$316.9 million), from RMB1,276.6 million in the same period of 2018. There has been 109.7% rise in the gross profit to RMB406.3 million (US$56.8 million) in the third quarter of 2019 from RMB193.7 million in the same period of 2018. Gross margin has expanded to 17.9% in the third quarter of 2019 from 15.2% in the same period of 2018. Non-GAAP operating income, rose by 139.0% to RMB147.0 million (US$20.6 million) for the third quarter of 2019 from RMB61.5 million in the same period of 2018. HUYA reported 70.5% increase in the Non-GAAP net income attributable to HUYA Inc. in the third quarter of 2019 to RMB206.4 million (US$28.9 million), from RMB121.0 million in the same period of 2018. At the end of September, 2019, the Company had generated cash and cash equivalents, short-term deposits and short-term investments of RMB9,537.2 million (US$1,334.3 million). The company has generated net cash provided by operating activities of RMB302.2 million (US$42.3 million) for the third quarter of 2019, compared to net cash provided by operating activities of RMB237.7 million in the same period of 2018.

Moreover, the company has delivered 77.2% increase in the Live streaming revenues to RMB2,156.1 million (US$301.7 million) in the third quarter of 2019, from RMB1,216.5 million in the same period of 2018, mainly on the back of the increase in both average spending per paying user and the number of paying users on Huya’s platform. The increase in average spending per paying user was mainly due to the enhancement of content attractiveness, the improvement in user experience and the optimization of product features.

Further, there has been 81.3% rise in the advertising and other revenues to RMB109.0 million (US$15.2 million) in the third quarter of 2019, from RMB60.1 million in the same period of 2018, on the back of rise in the demand from gaming advertisers, the newly launched advertising distribution platform by the Company and further recognition of Huya’s brand name in China’s online advertising market.

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