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Why JOYY Stock Was Sinking Today

By Jeremy Bowman - Mar 26, 2021 at 4:06PM

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The Chinese social media stock sold off in spite of a solid earnings report.

What happened

Shares of JOYY (YY -2.09%) were moving lower today after the Chinese social media company reported fourth-quarter earnings last night. 

As of 2:44 p.m. EDT, the stock was down 11.3%.

Two children playing on their phones

Image source: Getty Images.

So what

On the surface, it was a solid quarter for JOYY, which changed its name from YY in December. The company said revenue jumped 77.5% to $579.9 million as it expanded its international footprint and ramped up its monetization efforts. That included strong growth in Bigo, the video-streaming service it acquired in 2019, as revenue from Bigo Live increased 100%. Additionally, revenue from Likee jumped 407% and rose by 69% at Hago.

Despite the strong revenue growth, average mobile monthly active users (MAUs) declined 7.1% to 393.7 million, due to the Indian government's decision to block Chinese-owned apps, though JOYY saw increases in MAUs outside of India.

On the bottom line, JOYY reported another wide loss as the company continues to spend aggressively on areas like sales and marketing. It also reported an operating loss of $85.5 million, or a margin of 14.7%, which represented an improvement over a 40.5% operating loss margin in the year-ago quarter as it narrowed its loss from Bigo. On a per-share basis, the company reported an adjusted per-share loss of $0.29.

Commenting on the growth of Bigo outside of China, CEO David Xueling Li said, "Such progress illustrates not only our ability to capture the overseas market potential, but also our solid execution of growth strategies over the past several years."

Now what

For the current quarter, management expects revenue growth of 72.5% to 76.9% to $590 million-$605 million, though that revenue excludes Huya and YY Live as those businesses were sold to Tencent and Baidu, respectively.

The fourth quarter shows JOYY continuing to deliver strong revenue growth and narrowing its operating loss. However, Chinese stocks have been under close scrutiny over regulatory issues, and JOYY itself was accused of being a fraud in November by short-seller Muddy Waters. After a brief dip then, JOYY stock continued moving higher, indicating overall confidence in the company.

 

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Stocks Mentioned

YY Stock Quote
YY
YY
$39.76 (-2.09%) $0.85
Baidu, Inc. Stock Quote
Baidu, Inc.
BIDU
$118.86 (-3.71%) $-4.58
Tencent Holdings Limited Stock Quote
Tencent Holdings Limited
TCEHY
$43.51 (-6.97%) $-3.26

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