Chinese tech stocks, including video streaming platforms, have struggled through 2022. DouYu’s stock has been particularly hard-hit, losing half its value through to November, despite a partnership with leading cloud provider Tencent. Genius Brands has shown promising growth, posting a 951% increase in Q3 revenues.
- Genius Brands increases revenues 951%
- Despite Chinese streaming stocks struggling, industry analysis predicts CAGR of 20% for streaming industry between 2022 and 2029
- SPDR FactSet Innovative Technology ETF offers exposure to DouYu and iQIYI
As Chinese video streaming platform providers Genius Brands [GNUS], DouYu [DOYU] and iQIYI [IQ] geared up to release their latest earnings results last week, they did so amid a tricky economic backdrop.
The three stocks have struggled in 2022. The DouYu share price has declined 56.4% year-to-date, despite securing a partnership with Chinese streaming market powerhouse Tencent [TCEHY], which powered 90% of live streaming servers in 2019. DouYu formed a partnership between its streaming platform Mildom and Tencent in August. Through that month, its share price rose by 31.6%.
Meanwhile, the Genius Brand stock has dropped 34.3% so far this year, and iQIYI has fallen 46.7% over the same period.
Until recent weeks, China’s government had maintained its strict ‘Covid Zero’ policy, which has weighed heavily on growth in the country’s equities. The Hang Seng Tech Index fell more than 50% into October this year, and while stocks recently bounced as it looked like the policy might loosen, a rise in Covid-19 cases and deaths recorded since May have once again dampened investor sentiment. Between Friday 18 November’s market close and that of Thursday 24 November, the Hang Seng index fell 1.8%.
Chinese streaming stocks reveal path for growth
Growth avenues remain for the streaming firms willing to find them. On 15 November, Genius Brands announced a 951% year-over-year increase in Q3 revenues to $19.7m. While revenue exceeded analyst expectations of $19.2m by 2.5%, it marked an 11% decline from the previous quarter. Net loss per share increased year-over-year from $0.03 to $0.04.
DouYu announced a less positive story in its results this week on 21 November. Net revenues fell 23.4%, from 2.35bn Chinese yuan to 1.8bn yuan ($252.8m). Adjusted earnings per American depositary share (ADS) of 0.09 yuan (US$0.01) fell 30.8% below analyst expectations, and marked a 10% decline over the previous quarter. Average mobile monthly active users (MAUs) decreased 7.7% year-over-year to 57.1 million.
On 22 November, iQIYI announced its Q3 results. Revenues fell 2% year-over-year to 7.5 billion yuan, although diluted net losses per ADS shrank from negative 2.17 yuan in the year-ago quarter to negative 0.46 yuan. These losses missed analyst expectations by 411.1%. Nonetheless, revenues came in 2.2% above analyst expectations, according to polls conducted by the Financial Times.
Investing in Chinese streaming stocks
Chinese streaming services have an enviable position in a market that is set to grow, particularly in Asia. A 21 November report from Data Bridge Market Research forecasts a compound annual growth rate (CAGR) of 20.0% for the global video streaming industry between 2022 and 2029, by which time the sector is predicted to be worth $26.8bn. A separate report from Omnia and the Financial Times has anticipated that by 2026, three of the world’s fastest-growing digital economies will be Vietnam, India and Indonesia, while China will still be the world’s largest digital market.
Shaojie Chen, CEO of DouYu, said his company had “achieved stable and holistic business development as we navigated through a challenging macro environment,” pointing to the investment the company had made into its content and services and a 2.5% increase in mobile MAUs since the previous quarter.
Despite the underwhelming set of results, iQIYI’s Founder, Director and CEO Yu Gong hailed his company’s “iconic turnaround”, stating that “business performance far [exceeded the company’s] targets set at the beginning of the year."
Funds in focus: SPDR FactSet Innovative Technology ETF
The SPDR FactSet Innovative Technology ETF [XITK] offers exposure to both iQIYI and DouYu, with 1.26% and 0.96% weightings respectively as of 22 November. The fund has fallen 48.6% year-to-date, although it has stabilised since the start of November, during which it gained a modest 0.92%. The fund doesn’t currently hold Genius Brands.
The single analyst polled by the Financial Times offering a 12-month price forecast for Genius Brands anticipates 624.6% growth to $5.00 from its most recent close of $0.69.
The median 12-month estimate for DouYu’s stock among eight analysts polled by the Financial Times is $1.18, 2.6% above the last close of $1.15.
While the median estimate among 21 analysts for iQIYI’s stock of $4.35 implies 79% growth from the latest close, there is considerable variance at the extremes, though all of them indicate positive growth. The high target of $17 implies 599.5% growth and the low target of $2.60 suggests a 7% upside from the recent closing price of $2.43.