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Twitch-like Huya’s stock dives over 10% despite solid earnings results in Q1

The firm’s strong first-quarter performance was overshadowed by new US regulations promoting stricter rules on Chinese companies.

credit: DFIC

Video game livestreaming platform Huya (NASDAQ: HUYA) saw its stock price dropping 10.27% to USD 17.09 as of market close on Thursday despite booking RMB 2.41 billion (USD 340.6 million) in total revenue during the first quarter of 2020, up 47.8% year-on-year (YoY), according to the company’s quarterly report released on Thursday.

Although Huya’s strong performance exceeded market expectations of RMB 2.39 billion (USD 336.7 million), the Guangzhou-based firm’s share price suffered after the US Senate passed the Holding Foreign Companies Accountable Act, which intensifies the scrutiny of Chinese firms listed in the US, forcing them to adhere to the same regulatory policies as US firms.

However, Huya delivered a solid performance in the quarter. The firm saw substantial growth in its user metric as the COVID-19 lockdown encouraged isolated activities like gaming. MAUs of Huya Live reached 151.3 million, up 22.2% YoY, while mobile MAUs grew 38.6 YoY to 74.7 million. Meanwhile, the number of total paying users on the platform increased by 13% YoY to 6.1 million.

Unlike other online content platforms like iQiyi and Weibo, which saw declining advertising revenue in the first quarter of 2020, Huya’s revenue from advertising soared 74.0% YoY to RMB 137.5 million (USD 19.4 million), as advertisers shifted their spending to the gaming sector during the lockdown.

Huya organized 18 online e-sports events during the quarter, attracting over 113 million views, up 79% YoY.

Huya’s CEO Rong Dongjie said on the earnings call that the company will continue to collaborate with Tencent on gaming, e-sports, and AI technology. Tencent became Huya’s largest shareholder in April 2020, after the Shenzhen-based giant exercised its option to acquire is 16.5 million Class B ordinary shares of Huya for USD 252.6 million from parent company Joyy Inc (NASDAQ: YY).

Catherine Liu, Huya’s CFO, explained on the earnings call that the firm will expand into e-commerce livestreaming in the next few months, as an attempt to diversify revenue sources. Specifically, Huya will serve as a platform for broadcasters to sell products, and will not be involved in the logistics and supply chain aspect.

For the second quarter of 2020, Huya estimates total revenue to be between RMB 2.6 billion and RMB 2.63 billion, representing an annual increase of between 29.3% and 30.8%.