Stock to Track: YY Inc. (NASDAQ:YY)

YY Inc. (NASDAQ:YY) reported earnings for the three months ended March 2016 on May 31, 2016. The company earned $0.71 per share on revenue of $234.43M. Analysts had been modeling earning per share of $0.82 with $225.6M in revenue.

YY Inc. (YY), a revolutionary real-time interactive social platform, announced its unaudited financial results for the first quarter of 2016.

First Quarter 2016 Highlights 

  • Net revenues increased by 43.4% to RMB1,649.3 million (US$255.8 million) from RMB1,150.3 million in the corresponding period of 2015.

Mr. David Xueling Li, Chief Executive Officer of YY, stated, “We continued to see solid growth momentum in our top line in the first quarter of 2016, primarily driven by our IVAS business. In particular, we saw significant growth in the mobile broadcasting business and have been able to rapidly capitalize on these opportunities through our newly launched mobile broadcasting app ME, which we will further develop this year. By featuring popular stars and hosting various entertainment events, we believe that there is significant potential to further accelerate its growth and enhance its popularity. Additionally, in the online music and entertainment business, our newly-launched Da Pai Wan Chang Hui is an interactive concert broadcasting service that connects celebrities and participants virtually. This new service clearly demonstrates our strategy to continue strengthening our professionally-generated content offerings and expand our user community. Overall, we remain confident in our market opportunities and aim to continue fortifying our position as the leading real time internet platform in China.”

Mr. Eric He, Chief Financial Officer of YY, commented, “In the first quarter of 2016, our total revenue increased by 43.4% year over year to RMB1.6 billion, reflecting the strength of our core business. Meanwhile, we were able to significantly grow the number of our paying users by 57.1% year over year to 3.89 million. Our online game broadcasting business Huya grew significantly, with an increase in revenue by 114.0% year over year and an increase in number of paying users by 131.7% year over year to 899,000.  For our online music and entertainment business, our on-going efforts to introduce diverse content resulted in a revenue increase of 55.8% year over year. Additionally, our mobile music and entertainment business continued its robust growth with a 202.8% year-over-year increase in revenue and 137.5% year-over-year increase in number of paying users. Because of the execution of our planned transition to an increasing amount of UGC content revenues across the YY platform, we have continued to experience compression to gross and operating margins.  This expected decline in margins results from the decreased concentration of our high-margin gaming revenues year over year, from 20.1% of total revenue to 10.4% in the first quarter of 2016, as revenue growth for our other offerings continues to outpace our gaming revenue. Going forward, we will continue to leverage our ecosystem and expand our innovative content and service offerings in order to meet the evolving demands of our massive user base.”

YY Inc. earnings per share showed an increasing trend of 1.1% for the current fiscal year. The company’s expected EPS decline rate for next fiscal year is 0%.Analysts project EPS growth over the next 5 years at 26.2%. It has EPS annual growth over the past 5 fiscal years of 16.8% when sales grew 115. It reported 43.4% sales growth, and -4.7% EPS decline in the last quarter.

The stock is trading at $34.6, up -1.42% from 52-week low of $34.36. The stock trades down -55.27% from its peak of $72.97 and % below the consensus price target of $68.5. Its volume clocked up at 1.58 million shares which is higher than the average volume of 1.06 million shares.

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