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  • Writer's pictureIshfaaq Peerally

What's next for DouYu?

The deal between Huya and DouYu $DOYU as it would have created a monopoly, according to Chinese Authorities. DouYu, the Twitch of China, would have merged with competitor Huya with Tencent owning bog portions of both companies. The Chinese government is already going after big tech such as Alibaba $BABA and Tencent in China. Hence, the deal failed.

China has the largest gaming market in the world and it is growing at a fast rate. DouYu has 337 million users with 174 million monthly active users and about 17 million paying users. The company grew its revenues by 10X in the last 4 years. The potential for the company is still here even with this deal failing. The only big competitor is Huya since YouTube $GOOG and Twitch $AMZN are banned in China.

DouYu has a good balance sheet with no debt and over $700 million in cash. They were supposed to pay a special dividend of $60 million on the day of the acquisition but now they can use this cash (and even more) to buyback shares. At such valuations, it is really cheap.

The PS ratio is about 1 with Huya having a PS ratio of 2. DouYu is undervalued but it is a volatile stock. Even if they don't buyback shares, in the long-term, this is still a good business to own. Here’s the full analysis of DouYu:

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