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Why YY, Inc. Stock Plunged 18% in August

By Steve Symington – Sep 12, 2018 at 1:29PM

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The Chinese live-streaming leader delivered solid quarterly results, but its outlook left investors wanting more.

What happened

Shares of YY Inc. (YY -0.56%) fell 18% in August, according to data from S&P Global Market Intelligence, after the Chinese live-streaming platform announced strong quarterly results but followed with disappointing forward guidance.

The stock plunged more than 13% on Aug. 13 alone, the first trading day after it told investors revenue had climbed 44.6% year over year to 3.773 billion yuan, or $570.2 million, translating to 34.3% growth in adjusted net income per American depositary share to 13.46 yuan, or $2.03. Analysts, on average, were looking for earnings of only $1.76 per share on revenue of $536.2 million.

Man in suit watching a red arrow crash through the floor


So what

YY Chairman and CEO David Xueling called it a "strong performance," noting that the number of mobile live-streaming paying users climbed more than 21% to 6.9 million.

"During the quarter, we achieved solid progress in traffic acquisition, product advancement, and technology enhancement," Xueling added. "Looking forward, we remain committed to continuous product innovation and technology advancement to uphold YY's market leadership in the live streaming industry."

Now what

For the current fiscal third quarter, however, YY sees revenue in the range of $610.4 million to $630.8 million, representing growth of 25.8% to 30% year over year. However, that's a notable deceleration from its Q2 growth rate, and most analysts were modeling revenue near the high end of that range.

Still, YY has made a habit of under-promising and over-delivering of late, so I won't be the least bit surprised if it manages to outperform when all is said and done in Q3. But given macroeconomic concerns in China and with the stock up nearly 19% in the year leading up to its report last month, it was hardly surprising to see YY pull back.

Steve Symington has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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