Last week, you might have seen that JOYY Inc. (NASDAQ:YY) released its full-year result to the market. The early response was not positive, with shares down 4.3% to US$49.45 in the past week. JOYY reported CN¥26b in revenue, roughly in line with analyst forecasts, although statutory earnings per share (EPS) of CN¥42.83 beat expectations, being 6.3% higher than what analysts expected. Following the result, analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. So we gathered the latest post-earnings forecasts to see what analysts' statutory forecasts suggest is in store for next year.
Following the latest results, JOYY's 18 analysts are now forecasting revenues of CN¥32.6b in 2020. This would be a substantial 28% improvement in sales compared to the last 12 months. Statutory earnings per share are expected to dive 67% to CN¥14.33 in the same period. Before this earnings report, analysts had been forecasting revenues of CN¥32.3b and earnings per share (EPS) of CN¥15.44 in 2020. Analysts seem to have become a little more negative on the business after the latest results, given the minor downgrade to their earnings per share forecasts for next year.
The average analyst price target fell 5.7% to US$75.76, with reduced earnings forecasts clearly tied to a lower valuation estimate. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. Currently, the most bullish analyst values JOYY at US$94.00 per share, while the most bearish prices it at US$60.00. As you can see, analysts are not all in agreement on the stock's future, but the range of estimates is still reasonably narrow, which could suggest that the outcome is not totally unpredictable.
Zooming out to look at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up both against past performance, and against industry growth estimates. Next year brings more of the same, according to analysts, with revenue forecast to grow 28%, in line with its 34% annual growth over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenues grow 14% per year. So although JOYY is expected to maintain its revenue growth rate, it's definitely expected to grow faster than the wider market.
The Bottom Line
The most important thing to take away is that analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. Happily, there were no major changes to revenue forecasts, with analysts still expecting the business to grow faster than the wider market. Analysts also downgraded their price target, suggesting that the latest news has led analysts to become more pessimistic about the intrinsic value of the business.
Still, the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple JOYY analysts - going out to 2023, and you can see them free on our platform here.
We also provide an overview of the JOYY Board and CEO remuneration and length of tenure at the company, and whether insiders have been buying the stock, here.
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