YY - JOYY beats Q1 estimates: should you buy?
2024-05-29 04:04:00 ET
Streaming company JOYY Inc. (NASDAQ:YY) reported its Q1 2024 earnings after market closing on May 28 th , exceeding both revenue and earnings expectations. The company’s non-GAAP EPADS came in at $1.02, surpassing estimates by $0.21, while revenues reached $564.6 million, beating forecasts by $10.6 million despite a 3.3% year-over-year decline.
Revenue and profit analysis
JOYY’s strong cash position, with over $3.57 billion in cash and equivalents and short-term investments as of March 31, 2024, along with positive operating cash flows of $75 million, underscores its financial resilience. However, the company’s stock saw a significant 7% drop in after-hours trading following the earnings release, reflecting investor concerns despite the positive results.
In Q1, JOYY’s core business segment, BIGO, continued to drive the company’s performance. BIGO’s revenue grew by 8% year-over-year to $505.2 million, highlighting a recovery trend. This growth was driven by a 6.9% increase in paying users and significant gains in non-livestreaming revenue.
Overall, JOYY achieved a net profit of $45.3 million and a non-GAAP net profit of $67.2 million, representing net margins of 8.0% and 11.9%, respectively. The robust financial performance was attributed to ongoing cost discipline and operational efficiencies.
Strategic challenges and initiatives
Despite these achievements, JOYY faces several challenges. The average mobile monthly active users (MAUs) for Bigo Live and Likee saw declines compared to the previous year, although global MAUs grew slightly to 277.3 million. Additionally, the average revenue per paying user for BIGO decreased from $244.8 to $235.4. These mixed metrics indicate that while JOYY is making progress in certain areas, it still needs to address user retention and monetization strategies more effectively.
JOYY’s future growth prospects are supported by its strategic initiatives and robust financial foundation. The company has been actively investing in expanding and diversifying its revenue streams. For instance, BIGO’s recent enhancements in content and service optimization for creators, and Likee’s interactive gaming features, are expected to foster user engagement and growth.
Furthermore, JOYY’s commitment to shareholder value is evident in its ongoing share repurchase program, with an additional $54.5 million worth of shares repurchased in Q1 2024.
Bank of America downgrade
However, the valuation of JOYY has been under pressure due to mixed perceptions about its future profitability and growth potential. Recently, Bank of America downgraded JOYY to a Neutral rating, citing concerns over the maturation of its live streaming business, limited revenue and margin upsides, and the early-stage nature of its new business ventures like Shopline, which currently remain loss-making.
Future outlook and Q2 2024 guidance
Looking ahead, JOYY’s guidance for Q2 2024 indicates expected net revenues between $538 million and $569 million, slightly below the consensus of $565 million. This conservative guidance, combined with the recent market reaction, suggests that investors are taking a wait-and-see approach, balancing the company’s strong current financials against the uncertainties of its growth strategy.
Now, let’s see what the charts have to say about JOYY’s current stock performance and future potential. This technical analysis will provide a deeper insight into whether the recent dip presents a buying opportunity or if caution is still warranted.
From sky-high to rock bottom: JOYY’s journey
JOYY’s stock reached an all-time high of $148.88 in February 2021. However, it quickly entered a steep downtrend, falling below $25 within a year. Since then, the stock has mainly traded within a $24-$42 range.
Following the market reaction to its Q1 earnings, the stock is expected to open weak today. For bullish investors, this could present a buying opportunity once the stock stabilizes after the opening, but they should set a strict stop-loss at $23.8. If the stock remains above $23.8, it could potentially rise again to test the upper range limit around $42, where profits can be booked.
Bearish traders should wait for a bounce before shorting the stock, or wait for a break below $24. If the stock rebounds in the coming days, short positions can be initiated around $35 with a stop-loss at $42.8, aiming to take profits near $24.
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