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Why Shares of YY Gained 16% in January

Keith Noonan, The Motley Fool

What happened

YY (NASDAQ: YY) stock gained 16% in January, according to data from S&P Global Market Intelligence. The Chinese social media company's share price fell roughly 47% last year after nearly tripling in 2017, and it kicked off 2019 by regaining some ground. 

YY Chart

YY data by YCharts.

YY operates a video-based social media platform and has seen volatile stock swings as investors have weighed the company's slowing sales, earnings, and user growth and the risks posed by unpredictable government intervention against the company's sizable user base and solidly profitable business. There does not appear to have been major company-specific news behind its stock gains last month, but with investors warming back up to Chinese tech stocks, shares were primed for a rebound.

A blue illustration of a person with thought bubbles on a screen.

Image source: Getty Images.

So what

The Invesco China Technology ETF, which combines 70 tech stocks from the country into a single fund and stands as a good benchmark for industry performance, climbed roughly 8% in January. Even after last month's gains, YY shares trade at roughly 8.5 times this year's expected earnings. That's a valuation that leaves substantial upside if the company's core business continues to post even modest growth or if its Huya subsidiary outperforms expectations -- so investors who are looking for exposure to China's technology and social media markets should have the stock on their radar. 

Now what

YY shares have slipped early in February, trading down roughly 3.8% in the month so far. 

YY Chart

YY data by YCharts.

YY is expected to report fourth-quarter earnings early in March, and is guiding for sales to grow roughly 23% year over year at the midpoint of its target. 

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Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.