Morgan Stanley analyst Alex Poon maintained a Sell rating on Huya (HUYA – Research Report) today and set a price target of $3.10.
Alex Poon has given his Sell rating due to a combination of factors impacting Huya’s financial performance and market positioning. The forecast for Huya indicates a significant decline in live streaming revenue by 22% year-over-year, primarily due to unfavorable macroeconomic conditions and adjustments to platform features. Additionally, an expected decrease in the mobile monthly active users (MAUs) from approximately 85 million in 2023 to around 80 million in 2024, as a result of a reduced sales and marketing (S&M) budget, underscores the challenges facing the company’s user engagement and growth.
Despite a potential increase in other revenues and a raised gross margin, driven by lower costs for game streamers and content as well as a profitable acquisition, the core operations of the company are still expected to operate at a loss. The positive non-GAAP net profit reported was mainly attributable to interest income, which masks the underlying operational loss. Furthermore, the stock is currently trading above its net cash value, which contrasts with peers in the industry that are trading at significant discounts. These factors contribute to the rationale behind the Sell rating on Huya’s stock.
In another report released on March 20, Citi also reiterated a Sell rating on the stock with a $2.30 price target.
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Huya (HUYA) Company Description:
HUYA, Inc. is a holding company, which engages in the development of game live streaming platform. The company provides live streaming content for mobile, personal computer, and console games. It also offers content to other entertainment genres, such as talent shows, anime, and outdoor activities. The company was founded in 2014 and is headquartered in Guangzhou, China.
