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On Tuesday, Jefferies analyst Thomas Chong increased the price target for JOYY Inc. (NASDAQ: YY) to $57.10, up from the previous target of $46.00, while reaffirming a Buy rating for the company’s shares. Currently trading at $52.98 and approaching its 52-week high, JOYY has demonstrated impressive momentum with a 54% return over the past year. The revision follows the announcement of a completed transaction involving YY Live, which was acquired by Baidu (NASDAQ:BIDU) in a deal valued at $2.1 billion. This development came as a surprise to the market. According to InvestingPro analysis, JOYY maintains strong financial health with an overall score of "GREAT."
In the deal, YY Inc (NASDAQ:YY). received an additional $240 million on top of the $1.86 billion it had previously obtained. The focus for investors is anticipated to shift towards the potential return to shareholders in light of this transaction. Trading at an attractive P/E ratio of 14.5x and maintaining more cash than debt on its balance sheet, JOYY appears well-positioned for potential shareholder returns. According to the analyst, the market did not anticipate the closing of the deal on YY Live, which has prompted a reassessment of JOYY’s stock value.
Baidu’s strategy in the aftermath of the acquisition involves reinvesting the $1.6 billion, which was held in escrow accounts, into its cloud services and artificial intelligence infrastructure. This move is part of Baidu’s broader effort to enhance its capabilities in these strategic technology sectors.
Chong’s comments provided insight into the rationale behind the price target adjustment: "Baidu and JOYY announced the closing of deal on YY Live which was not expected by market. The deal is USD2.1bn and YY received an additional of USD240m on top of USD1.86bn it received before. We expect market to focus on the return to shareholders. For Baidu, it reinvests the USD1.6bn in escrow accounts back to cloud and AI infrastructure. Raising JOYY PT to US $57.1 (from US $46)."
The completion of the YY Live deal and the subsequent investment plans by Baidu are significant moves that are expected to influence the strategic direction of both companies in the technology sector. For deeper insights into JOYY’s valuation and growth prospects, InvestingPro subscribers can access comprehensive research reports and additional financial metrics that help make informed investment decisions.
In other recent news, Baidu, Inc. has completed its acquisition of YY Live from JOYY Inc. for approximately $2.1 billion. This transaction has allowed Baidu to regain $1.6 billion previously held in escrow, which the company plans to invest in its cloud and AI infrastructure. Meanwhile, JOYY Inc. is addressing user safety concerns by reinstating its Bigo Live app on the Google (NASDAQ:GOOGL) Play Store and engaging in discussions with Apple (NASDAQ:AAPL) for its return to the iOS App Store. This follows the app’s removal due to safety issues, which impacted JOYY as Bigo Live contributes significantly to its revenue.
Analyst firm Jefferies has raised its price target for JOYY Inc. to $46.00, maintaining a Buy rating, based on the company’s strong execution and financial performance in the third quarter. JOYY’s third-quarter revenue met consensus estimates, and its adjusted operating profit exceeded forecasts, partly due to the performance of its subsidiary, BIGO. Despite these positive developments, JOYY faces challenges as it navigates the regulatory landscape and addresses issues that led to Bigo Live’s removal. Investors remain attentive to JOYY’s actions and future statements regarding the financial impact of these recent events.
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