Why Shares of YY Inc. Slipped Today

MarketsMotley Fool

What happened

Shares of YY Inc. (NASDAQ: YY) dropped on Tuesday after the Chinese live-streaming social media company reported its fourth-quarter results. Despite YY beating analyst estimates and providing guidance that was in line with expectations, the stock was down about 12.3% at market close.

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So what

YY reported fourth-quarter revenue of $557.4 million, up 46% year over year and about $5.7 million above the average analyst estimate. Revenue from streaming totaled $517.1 million, up 51.9% year over year, while online gaming, membership, and other revenue made up the rest of the company's top line.

Non-GAAP earnings per share came in at $2.27, beating analyst expectations by $0.43. CEO David Xueling Li gave some details on the growth of the streaming business, saying, "In the fourth quarter of 2017, driven by both YY Live and Huya, our mobile live streaming monthly active users (MAU) increased by 36.6% year over year to 76.5 million, and our total live streaming paying users increased by 25% year over year to 6.5 million. This further demonstrates the effectiveness and efficiency of our operational capabilities in our live streaming business."

YY expects to produce year-over-year revenue growth between 32.3% and 39% in the first quarter of 2018, which meets analyst expectations.

Now what

Despite better-than-expected results and solid guidance, shares of YY tumbled on Tuesday. The stock has gained more than 170% from its 52-week low, so this could be a case of the expectations built into the stock price getting ahead of what the company could deliver.

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Timothy Green has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.