DouYu stock $DOYU is at all-time low. The stock is down 88% and is one of my worst investments ever. Should I sell? Keep holding? or Buy more?
DouYu is called the Twitch of China and since both Twitch $AMZN and YouTube $GOOG are banned, they only have to compete with Huya and Tencent.
There is, however, a risk for DouYu in China that comes mainly from the government which has been going after the tech companies such as Alibaba $BABA, and Tencent and thus affecting the whole market. There is always the fear of VIEs and that Chinese stocks may be delisted.
The last earnings of DOYU were bad. Revenues were down YoY and the lost money for the quarter as opposed to the same quarter last year. We need to understand that last year was an exceptional year. If we compare with 2019, things are actually better. The good news about DouYu is that they have a positive FCF and many options in front of them. They have been buying back shares, for example.
DouYu is undervalued and the expected returns are quite big but I won't buy more for the time being since I have enough exposure. The risk concerning Chinese stocks is here. In the worst-case scenario, we won't lose much but in the best-case scenario, we can make a huge profit on DouYu. That's why I will keep holding for now.