HUYA Stock: Profitable Livestream Gaming Platform Down Over 80%
If you are keeping track of gaming stocks, you know the industry is in high demand. People are playing video games in record amounts. Not only that, but spending on video games increased by 35% in 2021. Despite the growth in popularity, HUYA stock is still down over 80% from its highs.
HUYA Inc. (NYSE: HUYA) is a Livestream gaming company based in China. The gaming company is quickly gaining momentum, with eSports blowing up in popularity.
Having said this, China is leading the +$1 billion eSports market, with the U.S gaining momentum. HUYA is the market leader with engaging live events attracting millions of viewers. As a result, the company is achieving impressive growth.
Yet, with the tech crackdowns and new regulations in China, HUYA stock is sitting right above its all-time low price of $6.08 a share. Keep reading to learn why HUYA stock is down and what to expect next.
What You Need to Know About HUYA Inc
For those of you familiar with the popular streaming app Twitch, HUYA is very similar. The company provides a platform for gamers to watch and interact with their favorite players.
On top of this, HUYA hosts several popular events, including:
- Gaming events
- Talent shows
- Anime
- Outdoor activities
- And more.
Furthermore, the company provides online advertising and software development services with its technology. The diverse portfolio is allowing for steady top and bottom-line growth.
With this in mind, HUYA is the leading live streaming platform in China, with mobile MAUs reaching over 85 million in Q3. The growth is supported by higher demand for live streaming events and more awareness from promotions.
Not only does HUYA have a growing user base, but users are sticking with the platform with 70% retention. With the pandemic limiting live sporting events, eSports is attracting new crowds.
And lastly, the company is expanding its international reach with its Nimo TV. The overseas streaming platform gained over 28 million MAUs in the third quarter alone. Revenues from Nimo TV soared 200% this year, with eSports events attracting fans from S.E Asia, the Middle East and Latin American countries.
Why HUYA Stock Is Falling
If you are not keeping up with the markets right now, most sectors are under pressure, with the exception of energy stocks. In particular, tech stocks are leading the way after seeing their values skyrocket since the pandemic.
But there’s more to it with HUYA. In addition to the pressure on global markets, HUYA stock is subject to regulation in China. The China tech crackdown is causing added pressure on tech giants like Tencent (OTCMKTS: TCEHY) and Alibaba (NYSE: BABA).
In fact, regulators shot down the proposed HUYA and DouYu deal that would have further expanded the company’s leadership in live gaming.
Last fall, the country started cracking down after Alibaba founder Jack Ma’s Ant Group’s IPO was suspended. Since then, authorities are on an anti-monopoly spree. The added risk is deterring investors.
Furthermore, the Chinese government implemented new restrictions on video game use, a major roadblock for HUYA’s business. The new rules allow children to play video games only on public holidays and weekends from 8 pm to 9 pm.
The new regulation affects HUYA’s business as the company relies on viewership hours to attract sponsors. In the third quarter, live streaming revenue fell by 2.1% due to lower player spending.
Yet the company is overcoming these challenges with strong demand for advertising and licensing content. As the company continues expanding its global reach, it lessens the risk with China regulation.
HUYA Stock Analysis
With HUYA stock resting on all-time lows, it’s easy to slap an “oversold” tag on it and talk about the upside. But in this case, HUYA does have a unique opportunity on its hands.
Despite the new rules, HUYA is growing steadily. The company hosted 131 3rd party eSport tournaments in Q3, generating 590 million total views. And even more, HUYA hosted 58 self-made events, with total viewers reaching 142 million, 40% more than last year.
As a result, total revenue increased 6%, reaching $461 million. The growth shows so far the company is overcoming the new challenges with heavy demand for content.
At the same time, HUYA stock is down over 80% from its highs and isn’t showing any signs of life. After peaking at levels over $36 per share in February, shares of HUYA continue fading. With this in mind, the new laws and regulations are spooking investors. Therefore, companies in China have watched their businesses lose billions in value over the past year.
Having said this, HUYA is a solid business with a growing top line, low debt and a strong industry outlook. The company is currently sporting an EV/Revenue of 0.01. When you compare it to peers, HUYA stock is severely under its value.
Nonetheless, investing in Chinese tech stocks can seem daunting with many unknowns.
HUYA Stock Forecast: Can HUYA Overcome The Odds?
Even though HUYA stock is getting beat up with surprising new rules targeting the industry, it’s expanding its user base beyond China. The move is helping stabilize growth while attracting users from around the world.
ESports is one of the most highly anticipated industries with growing demand for live entertainment. In fact, global revenue for eSports is projected to reach 1.62 billion in 2024.
Despite the government’s best actions to limit gaming, China will still be one of the biggest markets. And with HUYA extending its reach beyond the country, look for continuing user growth.
In the long term, HUYA stock looks like a good undervalued bet with huge market potential. At the same time, we see what happens when investors lose trust. Stocks can lose a significant amount of value with new regulation.
And China is proving they cannot be trusted when it comes to public markets. As a result, companies listed in China continue losing value. For example, the Hang Seng Index is leading global markets to the downside, losing nearly 20% in the past year.
If you decide to invest in HUYA stock, just know the risks that come along with it. Shares are already down over 80% from highs leaving investors underwater.