| Stock (Symbol) | Stock Price | |
YY (YY) |
$56 |
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| Data is as of | Expected to Report | Sector |
March 11, 2015 |
May 04 – May 08 |
Technology |
| Sharek’s Take | ||
 YY, a Chinese social network, has a lot of good things going for it, but the stock is on a downward trend. YY has doubled revenue every single year for 9 straight years, and grew sales 91% last qtr as profits soared 73%. Management also bought back $50 million in stock so far this year. So if everything is great, why is the stock down around 40% from its high? YY’s profit margin fell to 47% last qtr, down from 52% a year ago which the company blames on the business mix as well as increased bandwidth costs and sponsor fees for game broadcasting. Of its divisions, music is maturing, game broadcasting is growing rapidly but costs money for content, online dating is a new growth engine started in 2014, and the next frontier will be online education. The company invested to improve its mobile site and this has been a financial success. YY is expected to grow profits 68% a year for the next 3-to-5 years, yet has a P/E of just 15. It’s still one of my favorite stocks but I’m cautious as to why YY is this low. |
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| One-Year Chart | ||
 Another reason for the fall could be that profit growth has slowed for 3 straight qtrs. But 73% profit growth is still rapid growth. I just can’t get over how the P/E is just 15. |
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| Earnings Table | ||
 Profit growth was 73% last qtr as sales grew 91%.Once again the company crushed analyst estimates. Annual Profit Estimates decreased some. Quarterly estimates show profit growth slowing to the low-teens by the end of the year. Last qtr I reported the company expects 45% to 50% sales growth this year, these numbers should look better. |
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| Fair Value | ||
 Over the last three-quarters I’ve lowered my Fair Value P/E from 55 to 40 and now 30. But even with a P/E of 30 the stock should be a double from here. Still, YY doesn’t have strong momentum right now so be cautious. |
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| Ten-Year Chart | ||
 The stock went on a huge tear higher after it went public, so the trend down could be due to profit taking. Or that profit growth is estimated to be just 19% this year (and that number just slipped). |
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| Power Ranking | Bottom Line | |
Growth Portfolio
1 of 22 |
YY is a rapidly growing social network that’s successfully diversifying into many areas. Still, profit margins are slipping and there’s something fishy going on with YY’s stock because it’s trending down but should be going up. I recommend investors have a good position in YY but be cautious and not load-the-boat with the stock. |
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Aggressive Growth Portfolio
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