On Wednesday, Citi analyst Nelson Cheung adjusted the price target for HUYA Inc . (NYSE: NYSE:HUYA), a leading game live streaming platform, reducing it to $5.00 from the previous $5.90. Despite the price target cut, the firm maintains a Buy rating on the stock.
HUYA Inc. reported its third-quarter financial results for the year 2024, revealing a revenue of Rmb1.54 billion, which marks a 7.6% year-over-year decline. However, the results were consistent with both Citi's and the Street's projections, showing a modest increase of 2.2% quarter-over-quarter. This performance was attributed to significant growth in game-related services, which saw a 209% year-over-year and 33% quarter-over-quarter increase to Rmb410 million. Furthermore, the company maintained a stable paying user base of 4.6 million, despite the broader macroeconomic challenges and industry pressures affecting live-streaming revenues.
The company also outperformed expectations in terms of non-GAAP net profit, which exceeded Citi's and the Street's forecasts by 27% and 23%, respectively, reaching Rmb78 million. This was partly due to stringent operational expense control and the receipt of one-off rebates.
Looking ahead to the fourth quarter of 2024, HUYA's game-related service revenues, which are largely dependent on game distribution, virtual item sales, and advertising, may experience weaker seasonality due to a reduction in new game launches. Nevertheless, Citi anticipates that both monthly active users (MAUs) and the number of paying users will remain stable. The analyst also noted that, despite potential softer profitability in the next quarter due to seasonal factors, the renewal of the licensing agreement for League of Legends (LoL) for the years 2024-2025 and continued operational expense control should lead to content cost optimization.
In light of these factors, Citi has maintained its Buy rating for HUYA Inc. but adjusted the price target to $5.00, reflecting the company's current financial outlook and anticipated market conditions.
In other recent news, HUYA Inc. reported a strong growth in its game-related services in the third quarter of 2024, with revenues reaching a record high and contributing significantly to the company's total net revenues of RMB 1.54 billion. Despite a decrease in live streaming revenues and a challenging macroeconomic environment, the company's strategic focus on game distribution and in-game item sales has led to a substantial increase in game-related service revenues. The company also reported an increase in mobile monthly active users and paying users, while successfully managing to reduce operating expenses.
Game-related service revenues hit a record high, contributing 26.7% to HUYA's total net revenues. The company's collaboration with content platforms led to content being viewed by over 140 million users in September. Game distribution revenue grew 20 times year-over-year with popular titles such as Honor of Kings and QQ Speed Mobile.
HUYA also entered a supplemental licensing agreement for League of Legends, expected to lower e-sports licensing costs. The company holds RMB 8.1 billion in cash reserves and has returned approximately USD 400 million to shareholders through dividends and share repurchases.
InvestingPro Insights
To complement the analysis provided by Citi, recent data from InvestingPro offers additional context for HUYA Inc.'s financial position and market performance. As of the last twelve months ending Q2 2024, HUYA's revenue stood at $858.59 million, reflecting a significant decline of 24.38% compared to the previous period. This aligns with the article's mention of the 7.6% year-over-year revenue decline in Q3 2024.
Despite the revenue challenges, InvestingPro Tips highlight that HUYA "holds more cash than debt on its balance sheet" and "liquid assets exceed short term obligations," suggesting a strong financial position that could help the company navigate through current market pressures. This financial stability may support Citi's maintained Buy rating, even as they adjust the price target downward.
Another relevant InvestingPro Tip indicates that "analysts anticipate sales decline in the current year," which corroborates the cautious outlook for Q4 2024 mentioned in the article, particularly regarding the potential weakness in game-related service revenues due to reduced new game launches.
For investors seeking a more comprehensive analysis, InvestingPro offers 7 additional tips for HUYA, providing a deeper understanding of the company's financial health and market position.
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