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Why Shares of Huya Tumbled Today

By Timothy Green - Updated Apr 11, 2019 at 3:32PM

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The Chinese video game live-streamer posted strong results, but they weren't good enough for investors.

What happened

Shares of Huya Inc. (HUYA 0.25%) slumped on Wednesday despite a fourth-quarter report that came in ahead of analyst expectations. The Chinese live-streaming game company posted robust revenue and earnings growth, but that wasn't enough to keep the stock afloat. Shares were down about 10.6% at 3:30 p.m. EST.

So what

Huya reported fourth-quarter revenue of $218.9 million, up 103% year over year in local currency and about $9 million higher than the average analyst estimate. Average monthly active users totaled 116.6 million, up 34.5% year over year, while average mobile monthly active users rose 30.7% to 50.7 million. The total number of paying users was 4.8 million, up 73.1% year over year.

Check out the latest earnings call transcript for Huya.

A declining stock chart on a display board

Image source: Getty Images.

Non-GAAP (generally accepted accounting principles) net income per American depositary share was $0.11, increasing by a factor of four in local currency on a year-over-year basis. "In 2018, our platform generated more than 1.6 billion viewership from over 400 e-sports events broadcasted. We will continue to enrich our content ecosystem, providing more services and opportunities to our broadcasters and partners," said Huya CEO Rongjie Dong.

Now what

Huya expects to grow revenue in local currency in the first quarter of 2019, by 79% to 83.7% year over year.

Valuation may be playing a role in the stock's decline on Wednesday. Non-GAAP earnings per ADS were $0.30 for 2018, putting the price-to-earnings ratio at around 100 prior to the post-earnings sell-off. The company is growing quickly, but investors may not be convinced that this level of growth is sustainable, or that it justifies a nosebleed valuation.

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