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  • Writer's pictureIshfaaq Peerally

Why I'm not buying DouYu Stock

I said that I would buy more of DouYu $DOYU if the stock price keeps falling but it seems I'm not. Why?

The second-quarter earnings of DouYu were great in my opinion. Even though revenues and profits were down relative to 2020, we need to understand that in Q2 of 2020, there was the pandemic in China and people were playing more video games. If compared to 2019, things are still improving for DouYu.

The main reason why I bought DouYu was for the arbitrage opportunity as they were being acquired by their competitor Huya. This deal was being done by Tencent which has big ownership in both companies. The new company would have controlled 80% of the market and the regulators did not allow the deal to go through.

In general, however, Chinese stocks are not doing great right now, especially Chinese tech such as Alibaba $BABA .

The stock price of DouYu is down 80% from all time high and the stock is undervalued. Why I'm not buying more. It is simply because I have enough exposure for now. As a Popular Investor on eToro, I cannot buy more to give my copiers that much exposure. DouYu is going to be volatile and the reward as compared to GameStop $GME for example is not the same. When I invested in GameStop, I was not worried about the volatility as the risk was very low. But the risk with DouYu is here.

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