JOYY Stock Forecast

JOYY Stock Forecast: JOYY, Inc (YY) is a video messaging and streaming platform with a mission to “connect people and enrich their lives through video,” per its August 2019 Investor Presentation. The company has been around since 2005 and is based in Guangzhou, China.

Until recently, JOYY was called YY Inc. It decided to change its name to better reflect its vision. JOYY means “Joyful and Youthful,” and it is a closer approximation to the company’s Chinese name Huan Jan, which means “Joyful Gathering.”

JOYY Crushes It Online With 400+ Million Users

Overall, JOYY boasts 433 monthly active users (MAUs) and a presence in 150 countries.

The company owns the number one instant messaging (IM) platform focused on video in the world (imo) and the number one global live streaming platforms in China and ex-China. It also runs the number two short-form video platform (Likee).

JOYY does a few different things. The company’s brand portfolio includes imo, Likee, HAGO, YY Live, Bigo Live, and Huya. Here is a brief look at JOYY’s most popular apps:

–       IMO: The app imo started out as a video communication app offering videos calls, but it has since expanded into short-form video, live streaming, group chats, and mini games. By the end of 2Q19, 9.6 million users out of 17.5 million regularly use short-form videos on the app.

–       LIKEE: Likee is another popular app. Its biggest competitor is TikTok. It targets Gen Z users who upload videos about their daily lives, comment on their friends’ videos, and discover videos based on AI-powered recommendations.

–       HAGO: This is a game-oriented social platform with monetized features. It is number one in the world and growing in popularity. Users spend an average of 60 minutes per day on the app.

–       YY Live: YY is the most popular social streaming service in China. It is number one in MAUs, number one in daily active users (DAUs), number one in the average time spent on the app, and number on in paying users. Part of its success is that it is part of an ecosystem that builds interactive connections between users and performers.

Is JOYY Stock A Buy?

One of the elements that make JOYY apps successful is that they leverage artificial intelligence to provide improve the user experience. AI guides content creation, user recommendations, and product testing.

The company has also been finding fresh ways to monetize its apps while engaging and growing its user base. The combination is compelling.

Revenue has been strong and JOYY is posting strong margins and profitability. Net revenue and the number of paying users has grown year after year – and perhaps most importantly, the company has shown strong margins across its different segments.

Right now, most of JOYY’s business comes from China, or at least its revenue does. Only 22% of its users are in China but they contribute over 80% of the company’s revenue.

If the company can get the formula right, it can tap into exponentially more sales. It already has a presence in more than 150 countries. JOYY may be able to grow its sales in those places and see its revenue explode. Maybe.

Risks of Investing In JOYY

The uncertainty surrounding that possibility is the biggest risk to investing in JOYY. The company has a unique business model and it is tapping into new markets.

User demand is not guaranteed. These markets are young and, for lack of a better word, fickle. JOYY will have to stay on top of trends and remain relevant to its user base.

If the company can manage to develop a strong business model that meets the needs of its users, it will also need to manage that growth internally.

The company itself is young and the waters where it is heading are somewhat uncharted. Furthermore, the technology that powers its products are not inexpensive. It takes serious investment to run and manage as well as to develop.

To be successful, JOYY will need to manage that growth and get the timing right so that it gets enough revenue to meet those investments.

Right now, it seems that JOYY has the pulse of users in China, but those tastes and preferences may not translate well to the rest of the world. Different cultures may have different tastes and there is a different range of competitors to face. JOYY will need to get a handle on that to compete and thrive in new markets.

Will JOYY Competitors Beat It?

JOYY has a range of competitors. It is up against big contenders like TikTok, Facebook, and Instagram plus the regional ones that may have strong standings in other countries. The company also has to compete with alternative social media offerings.

Streaming video is big now, but what if the trend changes? What if is a new platform that offers another way to connect with friends, celebrities, and brands? What if people start spending less time online?

In addition, there is always the way people relate to the apps themselves. Monetizing has often been a problem for social media companies because there are so many offerings that are not monetizing to the same degree or in the same way.

JOYY has to look at content substance and privacy as well. The way the company’s apps distribute content makes it impossible to verify. Some users may post illegal content or obscene videos.

It could face problems relating to libel, harassment, negligence, or trademark infringement.

JOYY Stock Forecast: The Bottom Line

JOYY has an impressive portfolio of products and strong growth prospects, but there is a serious risk that its offerings will not translate well into new markets. If that happens, the company may not see a return on its investments and its revenue will suffer.

Investors looking to buy into JOYY may see short-term growth as its current expansion strategy helps it gain more prominence in China.

They may also see some long-term growth if the company is able to develop a strong presence in other markets – but there is significant risk that should not be ignored. Tread carefully.

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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.