Is Yalla Group Stock A Buy?

Is Yalla Group Stock A Buy? Yalla Group Ltd – ADR (NYSE:YALA) is a Dubai, United Arab Emirates-based social networking and entertainment platform. The flagship app, Yalla, has voice chat rooms like Clubhouse. This makes it a popular investment in 2021 for those seeking something along that line.

Clubhouse is taking the United States by storm with its audio chat format. Unable to invest directly in it, retail investors flooded the company hosting the app on its servers. Meanwhile, the Middle East has its own burgeoning technology community.

The company already has over 14 million users and branched into gaming and services. It’s still young, but it’s serving a potential market of around 190 million social media users in the region.

Will Yalla Group leave investors’ portfolios muted with losses?

Yalla Has Smart Money Backing It

Yalla Group is a growing technology company that develops a variety of apps and platforms. This includes apps for voice chat, social networking, entertainment, online games, and gift exchange.

The company is one of the limited social media offerings in the Arab world, and it’s available on both the Apple App Store and Google Play store.

It received around $27 million in early-stage funding before its September 2020 initial public offering (IPO). This is because it serves a niche need that gets users off American or Chinese apps like Facebook (FB) or TikTok, respectively.

As it builds its user base, regional investors believe this could be a great international technology play. It invested about half of its IPO proceeds on marketing for more brand awareness and infrastructure upgrades.

This positions it to scale as it gains more users and could launch the company (and region) as a new Silicon Valley-like technology powerhouse. And that’s something Dubai wants to be, so investors are interested.

Is Yalla Group Stock A Buy?

Yalla Group had a market capitalization over $3.7 billion in Q1 2021, although the price is very volatile and could go notably up or down from that on any given day. The company’s share prices ranged from a 52-week low of $6.26 to a high over $40 per share since its September IPO.

The company raised over $149 million from its IPO, corresponding to a YALA share price of $8.00 per share. At that point it was valued around $1.1 billion.

Free cash flow for the 12 months ending June 30 was $37 million, and the company held about $58.6 million in cash and $14.1 million in total liabilities at the end of that period.

It reported over $25 million of net income in the six months that ended June 30, 2020. This shows the company has a strong e-commerce presence in the region, and its offerings are available in over 100 countries.

From what we can see of its earnings so far, top line revenue grew sharply, along with gross profit and cash flow. Of course, all this good news comes with a warning of the dark side of investing.

Risks Of Buying Yalla Group Stock

Although it’s growing fast, Yalla Group is still a relatively small technology company. It’s trading at more than 300 percent more than its IPO price, and the company is highly focused on the underserved MENA market, which could limit its success.

It must spend heavily on marketing to continue its growth, especially when expanding beyond its targeted region. There aren’t many localized social media options, and American platforms like Twitter (TWTR) have a dicey relationship with local governments over events like the Arab Spring.

This leaves the company with a wide open opportunity, so long as it can continue delivering. But as soon as it gains any traction, it’ll attract the attention of more competition.

Not only is it a social media platform, but it’s also enabling communication and collaboration. This puts it in competition with Microsoft Teams, Trello, Asana, Slack and others. Like any technology, rivalries quickly develop as multiple options flood the market for any successful app.

Clubhouse Vs Yalla Group Is The Real Battle

Yalla may be the only localized option, but it doesn’t mean social media doesn’t exist in the Middle East. In fact, Facebook (FB), Twitter (TWTR), Snapchat (SNAP), and TikTok all have a presence in the country. But that’s not the direct competition – it’s Clubhouse.

Clubhouse took the world by storm in the 2020s and is attracting a growing user base that contributes audio content 24/7. The platform is filled with benefit concerts, talk show-like speeches, and podcast and radio shows harvesting audience interactions.

Yalla and Clubhouse both found an innovative new approach in contemporary social media. The business and personal use cases are still being figured out. Meanwhile, all the above social platforms are working on ways to mimic it.

So long as its users remain loyal to the local team, Yalla has great growth potential. But if they stray, it could be a long road to provide investors with any real returns.

Is Yalla Group Stock A Buy? The Bottom Line

Yalla Group is a Dubai-based technology firm that develops social media, entertainment, and games among other applications. It has a growing user base and is one of few successful companies of its kind serving the MENA market.

Its biggest platform is its namesake Yalla platform – a Clubhouse-like social audio platform that’s creating all-new conversations.

There are about 190 million social media users in the MENA area, and the company has about 10 percent of them. As it continues to grow, it will gain momentum and spread to other areas of the globe. Of course, that process isn’t complete yet, so investors are taking a leap of faith.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.