Maintaining Hold on JOYY: Assessing Valuation, Subsidiary Performance, and M&A Uncertainties

Analyst Alex Poon of Morgan Stanley maintained a Hold rating on JOYY (YY – Research Report), with a price target of $37.00.

Alex Poon has given his Hold rating due to a combination of factors surrounding JOYY’s current market position and future expectations. The recent trading performance suggests that the stock presents a more attractive short-term valuation, which could potentially increase following the anticipated buyback post-4Q23 results. Moreover, the live streaming grossing of Bigo, a subsidiary of JOYY, is expected to be in line with the guidance and consensus. This implies a stable year-over-year performance when adjusted for specific factors.

Additionally, the stock is currently trading at a considerable discount to its net cash, which is close to its lowest point for the year to date, indicating potential for price appreciation. However, the uncertainty surrounding the completion of the Baidu/YY Live deal by the 1Q24 results tempers this optimism. Poon also notes that JOYY’s growth is limited compared to its peers, which could be a contributing factor to maintaining a neutral, or “Equal-Weight,” stance rather than a more bullish outlook.

Poon covers the Communication Services sector, focusing on stocks such as NetEase, Tencent Music Entertainment Group, and Bilibili. According to TipRanks, Poon has an average return of 10.1% and a 58.65% success rate on recommended stocks.

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JOYY (YY) Company Description:

JOYY, Inc. engages in managing a communication social platform, which enables users to join real-time online group activities through voice, text, and video. Its services include music and entertainment, online games, online dating, live game broadcasting, online education, and advertising. It operates through following segments: Live Streaming, Online Games, Membership and Others. The Live Streaming segment engages in the sales of in-channel virtual items used on live streaming platforms, including YY Live platform and Huya platform. The Online Games segment engages in the sales of in-game virtual items used for games. The Membership segment engages in the collection of membership subscription fees. The Others segment engages in the online education platform and online advertising and promotion. The company was founded by Xueling Li and Jun Lei in April 2005 and is headquartered in Guangzhou, China.