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Why DouYu Stock Jumped 18.4% Last Month

By Keith Noonan – May 6, 2020 at 9:11AM

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Tencent boosted its stake in DouYu's biggest rival. Here's why that's a promising sign.

What happened

Shares of DouYu (DOYU -6.84%) climbed 18.4% in April, according to data from S&P Global Market Intelligence. The gaming-video streaming stock bounced back after falling 17.5% in March's trading.

^SPX Chart

^SPX data by YCharts

DouYu stock climbed in conjunction with momentum for the broader market last month. The company's share price also appears to have benefited from Tencent Holdings opting to purchase a controlling stake in Huya -- DouYu's biggest rival in the gaming-video-streaming space.

A person looking at a mobile phone.

Image source: Getty Images.

So What

DouYu and Huya operate streaming platforms that allow users to broadcast live footage of themselves playing video games. The content category has seen rapid growth in recent years and looks primed for long-term expansion in the Chinese market.

Tencent Holdings exercised a pre-existing option to purchase a controlling stake in Huya early in April. Tencent also owns a substantial stake in DouYu, and news that the Chinese media conglomerate was purchasing a majority stake in Huya signaled its confidence in the gaming-video content space and raised the possibility that the tech giant would also move to acquire a larger stake in DouYu.

Now What

When DouYu published fourth-quarter results in March, the company laid out guidance for revenue between 2,100 million yuan and 2.16 billion yuan -- representing 43% year-over-year growth at the midpoint of the target. The company noted it had seen user engagement increase significantly since the start of the novel coronavirus outbreak, so the business appears to be capable of reaching that impressive growth target.

DouYu stock has dipped roughly 5.5% in May's trading, while the S&P 500 index has declined 2.4% across the same stretch.

Keith Noonan has no position in any of the stocks mentioned. The Motley Fool recommends HUYA Inc. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Tencent Holdings Limited Stock Quote
Tencent Holdings Limited
TCEHY
$36.00 (3.24%) $1.13
HUYA Stock Quote
HUYA
HUYA
$2.45 (-7.89%) $0.21
DouYu International Holdings Limited Stock Quote
DouYu International Holdings Limited
DOYU
$1.09 (-6.84%) $0.08

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

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