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Why YY Inc. Stock Fell 12.1% in December

By Keith Noonan – Updated Apr 16, 2019 at 11:14PM

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The social media company's stock lost nearly half of its value last year.

What happened

Shares of YY Inc. (YY -3.47%) fell 12.1% in December, according to data from S&P Global Market Intelligence. The Chinese social streaming company's stock sold off along with the broader market and closed out 2018 down roughly 47%. 

YY Chart

YY data by YCharts.

YY stock nearly tripled in 2017, but the company gave up much of those gains last year as its sales momentum slowed and investors soured on Chinese technology stocks. There wasn't any big company-specific news behind YY's December stock slide, but without any fresh positive developments to buoy the stock, shares sank as the market took a sharper turn into bearish territory.

A person using a mobile phone.

Image source: Getty Images.

So what

2018 was a challenging year for Chinese technology stocks. The Invesco China Technology ETF, which bundles together a wide range of tech stocks based in the country, fell 35% across the stretch. YY saw even bigger sell-offs amid concerns about the viability of its business and indications that sales growth is slowing. However, the streaming social media company is still posting solid sales and earnings expansion -- with its last quarterly report delivering a 32.6% year-over-year sales increase and 11.1% adjusted earnings growth. 

Now what

The Chinese tech sector has rebounded early in 2019, as the outlook for a resolution to trade disputes with the U.S. appears to have improved. The momentum has helped lift YY stock, with shares trading up 15.5% in January so far.

^SPX Chart

^SPX data by YCharts.

Even after regaining some ground this month, shares still trade at just 7.5 times this year's expected earnings. That could present a worthwhile entry point for investors who are intrigued by the company's better-than-expected third-quarter results and big stake in Huya -- a fast-growing social media platform for video-game streaming that was spun off from YY in 2018. However, YY's stock performance over the last couple of years highlights has been volatile, so risk-averse investors might want to steer clear of the stock despite its low earnings multiple.

Check out the latest YY earnings call transcript.

Keith Noonan 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.

Stocks Mentioned

YY Stock Quote
YY
YY
$31.27 (-3.47%) $-1.12
HUYA Inc. Stock Quote
HUYA Inc.
HUYA
$2.52 (-6.32%) $0.17

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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