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Citi maintains sell rating on HUYA with $2.30 stock target following Q4 result

EditorNatashya Angelica
Published 20/03/2024, 19:16
© Reuters.
HUYA
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On Wednesday, Citi reiterated its Sell rating on shares of HUYA Inc. (NYSE: HUYA), with a consistent price target of $2.30. The firm's analysis follows the company's fourth-quarter results for 2023, which showed revenue slightly above expectations and a narrower non-GAAP net loss than both Citi and consensus estimates.

HUYA, a company specializing in live streaming services, is expected to experience challenges in its core business due to ongoing adjustments. Still, advertising revenue could see a modest increase, driven by a rise in gaming-related revenues.

The gross profit margin (GPM) is anticipated to improve year-over-year, benefiting from a growing share of higher-margin gaming revenues and prudent cost control measures that are likely to enhance earnings.

The company also declared a special dividend of $0.66 per American Depositary Share (ADS), which corresponds to a payout ratio of 894% and a dividend yield of 15%. This dividend represents 10.7% of HUYA's cash position, which stood at $1.4 billion as of December 2023. Despite the substantial dividend, Citi expressed concerns about the sustainability of such a high dividend scale, given HUYA's thin margins.

Citi has adjusted its revenue forecasts for HUYA for the years 2024 and 2025, reducing them by 1% and 0%, respectively, to reflect the company's business transition. The stock price target remains unchanged at $2.30. The firm's stance on HUYA is based on a muted short-term outlook and the belief that the stock's recent rally is not justified by the company's financials or growth prospects.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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