Global Expansion And AI Ventures Will Unlock Future Momentum

Key Takeaways

• Strategic sale and focus on developed markets boost revenue growth and monetization, with AI driving operational and user engagement efficiencies.
  
• Strong non-livestreaming revenue growth and robust financial position support sustainable growth, dividends, and share buybacks, enhancing earnings and flexibility.
  
• Sale of YY Live and operational challenges suggest potential revenue volatility and limited growth, alongside focus on share repurchases over growth investments.

Catalysts

Operates social media platforms that offer users engaging and experience across various video-based social platforms.

• The strategic sale of the YY Live business for Mainland China will allow JOYY to focus on its global expansion strategy, particularly in developed countries, which has already shown a year-over-year revenue increase of 24.6%. This shift is expected to boost revenue growth and enhance monetization efficiency.
  
• The company’s focus on developing AI-driven initiatives for content recommendation and user engagement is expected to improve operational efficiency and user experience, leading to potential gains in earnings and net margins.
  
• The substantial growth in non-livestreaming revenue, including advertising and SaaS, which increased by 55.9% year-over-year, suggests strong momentum that is expected to continue into 2025, contributing positively to revenue and net margins.
  
• Management has approved a $600 million dividend program and a $300 million share repurchase program until December 2027, which demonstrates confidence in future cash flows and is likely to positively impact earnings per share (EPS).
  
• The solid financial position with a net cash position of $3.3 billion and ongoing cost optimization efforts are expected to support sustainable growth and profitability, while also providing flexibility for strategic investments, positively impacting net margins and earnings.

JOYY Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming JOYY's revenue will grow by 1.8% annually over the next 3 years.
• Analysts assume that profit margins will increase from -6.6% today to 9.7% in 3 years time.
• Analysts expect earnings to reach $229.8 million (and earnings per share of $4.17) by about March 2028, up from $-147.6 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 11.6x on those 2028 earnings, up from -14.8x today. This future PE is lower than the current PE for the US Interactive Media and Services industry at 19.5x.
• Analysts expect the number of shares outstanding to decline by 7.0% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.36%, as per the Simply Wall St company report.

JOYY Future Earnings Per Share Growth

Risks

• The sale of JOYY's Mainland China livestreaming business, YY Live, might limit revenue growth as it diminishes their revenue base, especially impacting net margins through the potential loss of a significant income source.
  
• Temporary removal from platforms for BIGO LIVE has caused short-term challenges to livestreaming revenue, indicating potential volatility in future earnings and revenue streams.
  
• The goodwill impairment charge of $454.9 million suggests potential overvaluation of previous acquisitions, which could affect net margins and investors' confidence in the financial statements.
  
• Changes to audio livestreaming products for compliance led to a $12 million negative impact and might continue to dampen revenue growth if such adjustments persist.
  
• There are indications of a strong focus on share repurchases and dividend payouts, which could divert cash and resources away from potential growth investments, affecting long-term revenue and earnings potential.

Valuation

• The analysts have a consensus price target of $52.373 for JOYY based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $64.0, and the most bearish reporting a price target of just $35.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $2.4 billion, earnings will come to $229.8 million, and it would be trading on a PE ratio of 11.6x, assuming you use a discount rate of 7.4%.
  
• Given the current share price of $42.03, the analyst price target of $52.37 is 19.7% higher.
  
• 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.