Digital Monetization And Mobile Entertainment Will Unlock Value

Key Takeaways

• Diversification into innovative segments and digital monetization is strengthening revenue streams and reducing reliance on declining areas.
  
• Operational cost optimization and AI-driven efficiency initiatives are supporting margin improvement and earnings resilience.
  
• Persistent user and revenue declines, intensifying competition, and shrinking margins threaten DouYu's core business stability and delay its return to profitability amid industry shifts.

Catalysts

Operates a platform on PC and mobile apps that provides interactive games and entertainment live streaming services in the People’s Republic of China.

• Robust growth in DouYu's innovative business segments (voice-based social networking and game prop sales) is expected to further diversify revenue streams beyond traditional livestreaming, supported by joint campaigns with game developers and refined product offerings, which should drive top-line growth and reduce reliance on shrinking segments.
  
• Accelerated adoption of digital monetization features, such as virtual gifting and tiered membership benefits, alongside expanding digital payment penetration in China, is poised to sustain or increase ARPPU (average revenue per paying user) and improve overall user revenues.
  
• Ongoing operational cost optimization-including reduced streamer compensation through performance-based models, strategic content rights procurement, and increased automation via AI-will likely enhance net margin and reduce operational losses.
  
• Expansion into broader mobile and interactive entertainment formats positions DouYu to capture incremental revenue and user engagement from the rising mobile internet and smartphone adoption in China and other emerging markets.
  
• Investments in AI-driven engagement tools, content moderation, and R&D productivity are expected to increase operational efficiency and gross margin, supporting improved earnings resilience even amid macroeconomic headwinds.

DouYu International Holdings Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming DouYu International Holdings's revenue will decrease by 5.0% annually over the next 3 years.
• Analysts are not forecasting that DouYu International Holdings will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate DouYu International Holdings's profit margin will increase from -7.1% to the average US Entertainment industry of 9.4% in 3 years.
• If DouYu International Holdings's profit margin were to converge on the industry average, you could expect earnings to reach CN¥337.6 million (and earnings per share of CN¥12.5) by about July 2028, up from CN¥-298.5 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 5.8x on those 2028 earnings, up from -5.1x today. This future PE is lower than the current PE for the US Entertainment industry at 29.4x.
• Analysts expect the number of shares outstanding to decline by 3.05% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 10.89%, as per the Simply Wall St company report.

DouYu International Holdings Future Earnings Per Share Growth

Risks

• DouYu's mobile MAUs (monthly active users) declined 13.9% year-over-year, and management attributed this to evolving industry dynamics and increased competition; persistent user base shrinkage could weaken ad revenues and depress overall top-line growth over the long term.
  
• Livestreaming revenues-formerly the core of DouYu's business-fell by 28.4% year-over-year, and user ARPPU (average revenue per paying user) also dropped by 11.5%; ongoing declines and reliance on cost-cutting rather than organic growth threaten revenue stability and earnings resilience.
  
• Management expects continued short-term and potentially medium-term declines in user base and revenues as a result of necessary cost reductions (especially on streamer compensation and event copyrights), which could further compress gross margins and delay the path to profitability.
  
• DouYu acknowledges that declining ROI on expensive content rights for esports tournaments and growing competition (with more platforms now able to broadcast official events) adds uncertainty to user acquisition and monetization efforts, risking loss of market share and future revenue streams as industry consolidation intensifies.
  
• Despite attempted revenue diversification, pressure from weak macroeconomic conditions, limited international growth, and high fixed costs has driven recurring operating and net losses, putting at risk both margin recovery and cash reserves as DouYu navigates a structurally shifting industry landscape.

Valuation

• The analysts have a consensus price target of $7.351 for DouYu International Holdings based on their expectations of its future earnings growth, profit margins and other risk factors.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be CN¥3.6 billion, earnings will come to CN¥337.6 million, and it would be trading on a PE ratio of 5.8x, assuming you use a discount rate of 10.9%.
• Given the current share price of $7.06, the analyst price target of $7.35 is 4.0% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.