1 Growth Stock That Investors Should Not Miss Out On

Investing in growth stock is a popular strategy that has yielded its practitioners good returns. There are plenty of examples of how such stock delivered astronomical returns to investors. Think Tencent Holdings Ltd (SEHK: 0700) — its share price rose more than 500 folds since IPO!

Of course, most companies never achieve the returns delivered by Tencent. That said, investors can still benefit enormously by investing in a basket of 10 – 15 strong growth companies.

In this article, we will look at one strong growth company that may be interesting to investors: HUYA Inc – ADR (NYSE: HUYA).

Huya

HUYA, also known as the Twitch of China, is a leading player in China’s online game streaming industry. The platform has 150 million monthly active users (MAUs).

The company provides a platform for hosts to deliver free content (mainly game-related, but also include other genres such as talent shows, anime, and outdoor activities) to viewers. In return, viewers purchase virtual gifts to reward their favorite hosts.

It generates the bulk of its revenue (95%) from selling these virtual gifts on its live-streaming platform. It generates the rest from advertising income.

Growth opportunities

Huya is the kind of stock growth investors love. In its latest quarterly result, the company reported that revenue grew 64% to US$354 million (in constant currency). Net income jumped 60.3% to US$ 22.9 million (in constant currency). Huya also grew its MAUs by 28.8% to 150 million. Paying users reaching 5.1 million for the quarter, up 5.9% from the same period in 2018.

And this solid performance is likely to continue as more Chinese consumers become interested in live streaming and e-sports. As the leading player in this industry, Huya is well-positioned to grow in the following ways:

  • It can increase its amount of paying users (150 million users are currently free).
  • It can grow the average spending of each user by improving the quality and diversity of contents sold on the platform.

In addition to its local Chinese business, Huya has introduced a new product Nimo TV. This product is currently only in a few markets in Latin America and Asia. That said, operating in these new markets lays the foundation for future growth.  Though this segment is not contributing much income now, this could change as the platform achieves scale and starts to monetize its users.

Foolish takeaway

China’s e-sports economy is booming. Huya is one of the leading players that could benefit from this trend.

Investors looking for growth stock might want to consider Huya.

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