Why Shares of YY Inc. Dropped Today

What happened

Shares of YY Inc. (NASDAQ: YY) slumped on Wednesday despite a first-quarter report that beat analyst estimates by a wide margin. The Chinese online social-entertainment company produced robust revenue and earnings growth, but it wasn’t enough to prevent the stock from tumbling 13.5%. YY stock also dropped despite solid results after its fourth-quarter report in March.

So what

YY reported first-quarter revenue of $518 million, up 43.3% year over year and about $30 million above the average analyst estimate. The number of mobile live-streaming monthly active users jumped 23.9% year over year, to 77.6 million, while the number of live-streaming paying users rose 17.3%, to 6.9 million. Live-streaming accounted for the bulk of the company’s revenue, with memberships, online games, and advertising now lumped into the “other revenues” category.

Image source: Getty Images.

Non-GAAP earnings per share came in at $1.72, up 18.5% year over year and $0.20 better than analysts were expecting. Looking ahead to the second quarter, YY expects to produce revenue growth between 38% and 41.8%. The company expects a significant loss related to derivative liabilities, which will push net income into the red.

Now what

YY’s first-quarter report was almost entirely good news, but the market punished the stock anyway. Prior to Wednesday’s drop, the stock had surged 25% over the past month. That rally may have been too much, too fast.

Shares of YY are still up nearly 80% over the past year, but investors seem to be cooling a bit on the fast-growing company.

10 stocks we like better than YY
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has quadrupled the market.*

David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now… and YY wasn’t one of them! That’s right — they think these 10 stocks are even better buys.

Click here to learn about these picks!

*Stock Advisor returns as of June 4, 2018

Timothy Green 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.

You May Also Like

About the Author: Over 50 Finance