HUYA - esports streaming

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:

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…

Q4 2017 revenues were $106m…

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:…
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.



Hi Dreamer,

Twitch has no competition in the US and Europe, which is the reason why it got so big.

But in China there are several companies like Huya, so what do you think of the competition like Douyu or, etc ?

Here is a list of some of the competitors…

And there can be even more companies out there. How to know who the winner will be?

Some of these companies “steal” streamers from their competitors by offering more money. How far can they burn money to attract the best streamers, and again who will be the winner in this sector?

I’m very interested in the streaming sector. I’m 25 years old, and I see the people of my age and the younger people watch more and more streams. I myself watch quiet often some streamers (on twitch). But I don’t know what company is the best in China in this sector.



But in China there are several companies like Huya, so what do you think of the competition like Douyu or, etc ?

Some of what you mentioned is discussed here:…

Huya has gotten much more interest from capital markets than Twitch. And now Tencent has thrown its own scale and capital into the ring to help it rise rapidly. Almost $1.1 billion worth of investment in Douyu and Huya captured the entire game streaming market. Huya is seen as a strategic investment and the plan is clear. Gaming is Tencent’s main source of revenue, so it naturally has more traffic, channels, and users. Regardless of how you see it, for Huya, the investment is a great help. As for future returns, they depend on whether Huya’s post-IPO strategy and market performance bring value back to Tencent. But the general direction seems to indicate solid future success.

Just my opinion, but in US we tend to have a US-viewpoint. Hard to imagine a country with almost 3-4x our population. Plus streaming companies like IQ and HUYA will/are looking to expand to other countries in Asia too.

So the idea that there can only be 1 winner is unrealistic, in my view. There may be a clear top dog winner and other lesser winners, but either way there is plenty of room for more than 1 company to thrive.

I saw a comment somewhere about a Douya IPO, but see nothing online right now, but wouldn’t be surprised if it happens. Tencent has invested in both, and wants both to succeed, which is good for HUYA. As far as bidding for talent, I think it is akin to Netflix paying billions for content every year to stay relevant and continue to retain plus grow their user base. In the fast-paced world of internet/gaming/streaming, I imagine the top talent will keep being shuffled, so I don’t really think it is a factor to be concerned about if, for example, Douya signs a top Streamer away from HUYA, or vice versa.

The more important factors, I imagine, are ease of use of the app, especially on mobile, and how they utilize data to personalize the experiences and make smart recommendations to their audiences moving forward to keep them engaged.



Thank you for your analysis. Last thing, do you think we should worry about the sales and marketing expenses ? With the same reasoning as my first post, Twitch has probably less sales and marketing expenses in the US and Europe because they have no competition. People just go to Twitch because there is nothing similar. But in China they have to spend alot more on marketing to compete with others right? Or is it something I’m too much overlooking ?

I also just saw that the stock already doubled after 3 weeks, so I’ll keep the stock on my watchlist for the moment and maybe start a position on a drop (if it ever happens).

Thank you for your analysis. Last thing, do you think we should worry about the sales and marketing expenses ? With the same reasoning as my first post, Twitch has probably less sales and marketing expenses in the US and Europe because they have no competition

Worry? No. Like any high-growth business, investing to gain share/size is often par for the course.

As for Twitch competition:…

YouTube Gaming, Google’s rival to game-streaming site Twitch, is starting to pick up traction. According to a new report from Streamlabs, Twitch continues to dominate the live streaming space, but YouTube grew its monthly active streamer base by 343 percent over the course of 2017. Twitch, by comparison, grew 197 percent.

Then of course you have Microsoft, who owns XBox, that launched their version called Mixer:

Here is a comparison of the 3 from Feb:…

Twitch is obviously the leader, but in general when there are billions to be made, whether from a product itself or as a byproduct of bringing more users to your broader portfolio and leveraging cross-sell/cross-promotional opportunities, you can be sure other companies will jump in.



Twitch has no competition in the US and Europe, which is the reason why it got so big.

There was a company called Own3D for a while, which aggressively competed with Twitch. It went bankrupt in 2013, owing lots of money to some of the top streamers it had contracted.

1 Like