What happened
Shares of DouYu International Holdings (DOYU +0.98%) were surging on Thursday after the company got a notable analyst upgrade. As of 3:15 p.m. EDT, the stock was trading 13% higher.
DouYu stock is continuing a recent climb. Shares have now recovered over 45% from March lows.
So what
An analyst with JPMorgan changed DouYu's neutral rating to overweight -- Wall Street jargon meaning the stock is undervalued. The analyst thinks the stock could be worth $11 per share in the next 12 months. The stock traded around $8 per share at the time of the upgrade, representing 38% upside.
Perhaps under normal circumstances this wouldn't have been enough to send shares soaring. But DouYu investors were already excited after the company reported results for the first quarter of 2020 earlier in the week. The company reported revenue of $321 million, which was ahead of expectations. And it also posted a $36 million profit, which made the stock pop.
Image source: Getty Images.
Now what
DouYu's top and bottom line surprised investors, but it's important not to overlook lackluster user metrics. Consider the company had 7.6 million paying users in Q1, good for 26% year-over-year growth. But that was only 4% more paying users than the fourth quarter of 2019.
Today's analyst upgrade anticipates DouYu's launch of new games later in the year. That may be the ticket for growing the number of users at a better rate, and something worth watching in coming quarters for this video game stock.
