This Tech Stock Is Backed by a Strong Portfolio of Assets
Given the worldwide outbreak of COVID-19—which has now become a pandemic—Chinese stocks that are listed in the U.S. are far from hot commodities at the moment. Indeed, with consumers scared to go outside and some regions still under lockdown, China’s economy will likely take quite some time to recover.
The thing is, while industries like airlines and hotels have been completely devastated, there are Chinese companies that are well positioned to thrive despite the pandemic.
And because their share prices have been punished nonetheless in the latest market sell-off, investors who pick up these stocks on the cheap may be in for some serious rewards once the situation improves.
And that’s why today I want to talk to you about JOYY Inc (NASDAQ:YY).
JOYY Inc used to go by the name YY Inc because it owns “YY Live,” a leading live-streaming social media platform in China. The company switched to its current name because JOYY stands for “Joyful and Youthful.”
Today, JOYY also owns a majority of Huya Inc (NYSE:HUYA), a leading game live-streaming platform in China. In 2019, JOYY completed the acquisition of Singapore-based tech company Bigo.
Through this acquisition, JOYY added several new platforms to its portfolio, including “BIGO Live,” a major live-streaming platform outside China, “Likee,” a leading global short-form video platform, and “imo,” a global video communication app.
JOYY Inc completed its initial public offering in November 2012. Its American Depository Shares (ADS) trade on the NASDAQ Global Market under the ticker “YY.”
Even though JOYY is not as big as some of the other Chinese tech stocks that trade in the U.S., it is actually one of the biggest players in China’s live-streaming industry.
In the fourth quarter of 2019, the company’s YY Live had 41.2 million average mobile monthly active users (MAUs), representing a 3.8% increase year-over-year. (Source: “JOYY Reports Fourth Quarter and Full Year 2019 Unaudited Financial Results,” JOYY Inc, March 16, 2020.)
Its Huya game live-streaming platform, which is often referred to as the “Twitch of China,” saw its average mobile MAUs grow 21.5% year-over-year to 61.6 million in the fourth quarter.
And thanks to its acquisition of Bigo, the company now has a strong presence internationally. In the reporting quarter, BIGO Live had average mobile MAUs of 23.1 million, up 18.6% from a year earlier.
These are just some of the growing social media platforms in JOYY Inc’s portfolio. If you add up all the apps, you’d see that the company’s global average mobile MAUs reached a whopping 485.2 million in the fourth quarter of 2019. Notably, 78.8% of those users came from outside of China.
This is a company that deserves global investors’ attention, to say the least.
JOYY Inc Has a Global User Base
Of course, the live-streaming industry is still highly competitive. And one of the main concerns for companies in this industry is that they might be burning too much cash to get ahead.
But YY stock investors don’t really have to worry about that. Although the company has been trying to expand its market share, it actually generated $256.8 million in net cash from operating activities in the fourth quarter.
Moreover, JOYY Inc had cash and cash equivalents, restricted cash and cash equivalents, short-term deposits, restricted short-term deposits, and short-term investments worth a whopping $3.9 billion at the end of 2019.
A solid cash position, plus positive operating cash flow, should be reassuring, especially in today’s economic environment.
Indeed, in its latest earnings press release, the company’s Chief Financial Officer Bing Jin said, “While we assess and monitor the financial impact of the outbreak in 2020, we are confident that our global footprint, diversified products matrix, and abundant cash reserve have positioned us to meet the challenges and seize the opportunities ahead.” (Source: Ibid.)
JOYY Inc has also been doing a good job of monetizing its expanding user base. In the fourth quarter of 2019, the total number of paying users of YY Live rose 9.8% year-over-year to 4.5 million. Meanwhile, the company’s Huya platform saw a 5.9% increase in paying users to 5.1 million.
Last but certainly not least, in fiscal 2019, JOYY’s net revenue surged 62.2% to $3.7 billion. The company also earned adjusted net income of $323.6 million for the year.
Put it all together and it’s pretty clear that YY stock is backed by a fast-growing business.
Ultimately, you should keep in mind that because people are afraid to go outside due to the coronavirus outbreak, they’ll probably spend more time on their electronic devices.
I wouldn’t be surprised to see an increase in live-streaming video consumption and social media participation during this pandemic. In other words, JOYY Inc may actually get a boost in its business.