Q1
Expectations
Last week, Huya reported solid first quarter results where revenues rose 93.4% while profits jumped 102% as the game live streaming and advertising revenues continue to witness strong demand. Average monthly active users (MAU) grew 33.3% aided by streaming of major gaming events to users.
Given the strong performance from Huya, investors would
be expecting YY’s Q1 results to be in line with expectations. When it comes to
street expectations, sales is anticipated to increase 29% to $603.78 million
and adjusted earnings to contract 11% to $1.38 per share. Last quarter, the
company guided revenues to grow 23.4% to 28% for the first quarter.
In the fourth quarter, YY’s mobile MAU grew 18.1% to 90.4
million while the paying users rose 36.6% to 8.9 million. Investors would be
keeping a close tab on these two metrics as it would lift margins in the near
future.
Bigo
Acquisition
YY acquired Bigo in March marking its foray beyond China. Bigo is into streaming and short videos app currently has users in South Asia, the Middle East, and Southeast Asia.
The Singapore-based firm is now a subsidiary of YY post the deal. This deal would be helping the firm to reduce its dependency from China and bring in stable revenues with the Bigo deal with a broader base. Bigo had 59.4 million mobile average MAUs in the fourth quarter of 2018.
It’s important to note that YY is facing intense
competition in China from the likes of Momo, TikTok, Tencent Music
Entertainment, Kuaishou, Douyin, Huoshan, DouyuTV and Live.me.
Investors would be expecting the management to provide
outlook for the next quarter and year including Bigo deal.
Bottom
Line
YY has steadily seen grow in the top line, but margins are under pressure as the company is currently investing in beefing up its platform to attract more users, adding more content and expanding through acquisitions. Last quarter, operating margins contracted to 15.5% from 22.7% in Q4 of 2017 which the company attributed to an increase in sales and marketing expense and a drop in gross margins.
YY’s peer Momo is scheduled to report its Q1 results. The dating app’s stock has been struggling in the last year due to the ongoing trade war as well as slowing growth from live streaming.