JPMorgan Raises Price Target on JOYY to $35, Maintains Neutral Rating

JPMorgan analysts raised their price target on JOYY (NASDAQ:YY) to $35 from $30, while maintaining a Neutral rating on the stock. The analysts noted that despite JOYY’s valuation being relatively low—where net cash at the end of Q2 2024 accounts for 65% of its market cap and the stock trades at 8x 2024E P/E—there are no clear catalysts for a meaningful revenue recovery, which is crucial for improving investor sentiment.

The company’s Q3 2024 guidance indicates weaker-than-expected revenue, driven by challenges in live streaming, particularly in the domestic Hello business, competition in the Middle East, and revenue sharing optimization in Europe. JPMorgan forecasts an adjusted net profit of $56 million for Q3 2024, representing a 32% YoY decline, due to a lower gross margin from the expansion of low-margin third-party ads.

The analysts believe that while share repurchase programs should help protect against downside risks, progress on resolving the YY Live deal could serve as a potential catalyst for share price improvement. The price target was raised based on a higher valuation multiple, reflecting solid buyback execution, though it maintains a discount to Huya.