Posted on NPI, wanted to share here. Company growing over 100% y/y, just posted $134m for Q1 for a 111% y/y growth and forecasted $150m and 115% growth for Q2. My guesstimate is that they finish around $650-675m for full 2018.
Often compared to Twitch, the company Amazon purchased for $970m in 2014. Here are some links on Twitch for reference.
At the time Amazon bought Twitch, social networks like Facebook had already demonstrated that app install advertising presented a viable revenue model. But what “Fortnite” does to draw viewership to Twitch goes way beyond banner ads—because what game streaming represents goes way beyond the neat little categories of entertainment, like watching live sports or scripted dramas, as we currently understand them. On one hand, Twitch operates just like a live video feed or a Netflix stream. On the other, it’s more like watching a live event such as a sports game, mixed with the personality of a radio host or comedian along with an interactive element for viewers.
According to Streamlabs, more than 1.1 million streamers were active on Twitch last quarter as the industry enjoyed a 39% lift in activity.
Ultimately, the rise of eSports in China is related to the booming video game market. In 2016, the Chinese video game sector was worth US$15.4 billion. By 2021, it is expected to challenge today’s largest market, the US, for first place, with expected revenues of $26.2 billion.
HUYA 2015 revenues were up 132% y/y: http://about.yy.com/1504/291898715813.html
HUYA 2016 revenues of $120m
HUYA 2017 revenues of $323m (174% growth y/y)
Q2 2017 revenues were roughly $70m, based on math for Q2 2018 forecast below.
Q3 2017 revenues were $83m https://www.cnbc.com/2017/11/14/globe-newswire-yy-reports-th……
Q4 2017 revenues were $106m https://globenewswire.com/news-release/2018/03/05/1415385/0/……
2018 revenues (so far)
$134m for Q1 (that is more than all of 2016) which was up 111% y/y.
Forecast for Q2: $150m which would be 115% y/y.
If they maintain close to 100% growth y/y for remaining Q3 and Q4, you would have:
Q1 2018 $134m
Q2 2018 $150m (projected)
Q3 2018 $166m (projected)
Q4 2018 $212m (projected)
For a total of $662m in 2018 revenues.
Current market cap is $6B, so a P/S of just under 10 using 2018 projected revenues.
It isn’t cheap, but stocks growing this fast, like SHOP, tend to be given a higher P/S. However, China tends to get a P/S haircut compared to US peers, so not expecting a 20 P/S like SHOP, but wouldn’t be surprised to see them maintain a 12-14 P/S while growth rates are still at 100% y/y.
if they only grow 50% y/y in 2019, they would have $1B in revenues. So unless they are given a P/S of 6 at that point, I don’t see how this stock doesn’t appreciate over the next couple years. Just a matter of at what multiple.
If you look at projections for Twitch here: https://www.cnbc.com/2016/05/13/amazons-twitch-streamers-can……
According to Piper Jaffrey’s Gene Munster, Twitch had 100 million unique monthly users, two million active streamers, and more than 240 billion minutes of gameplay last year. By 2020, he believes, Twitch could be worth $20 billion, generating $1 billion in revenue.
Not sure why he believes Twitch would be “worth” $20b on “only” $1B in revenues, but it gives you a yardstick for what HUYA’s value can be as the market starts to warm up to Twitch and then the Twitch peers around the world such as HUYA. If Munster is insane, but you give HUYA half the value, it would indicate a $10b “worth” for HUYA at $1B in revenues, which is about a 67% premium to today’s market cap. HUYA may also grow much faster than 50% in 2019, and reach $1B faster. Either way, I feel good about 67% upside from now over the next 18 months.
Here is an interesting nugget - and given China’s tendency to imitate US peers I can see this being replicated by HUYA over time - “Twitch is so much more than just gaming. There is cooking, music, and creative channels and there are more channels coming that will make Twitch a place for everyone not just gamers,” Alen says.
Gaming/esports will be the growth catalyst for short-term, but once your audience is there, you can imagine the use of AI/personalized recommendations/suggestions that lead a user to subscribe to additional channels of interest beyond esports.