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Finance

Which Chinese eSports Stock is a Better Buy?

DouYu (DOYU) and Huya (HUYA) are two of the gaming industry’s top stocks. These budding industry darlings don’t receive as much attention as Activision (ATVI) and Electronic Arts (EA), yet they are certainly worthy of your analysis.

Overlook the fact that DOYU and HUYA are based in China. In the context of investing, what matters most is money. Though Chinese companies can be criticized for lack of transparency compared to those based in the United States, China’s top gaming businesses are raking in massive amounts of money based on their services’ legitimate merits.

Which of these two Chinese eSports stocks is the better investment in 2021? Let’s find out.

DOYU’s Merits

DOYU has a reasonably low forward P/E ratio of 29.23, considering the fact that it is a gaming company on the cutting edge of technology. DOYU is currently priced around $5 below its 52-week high of $20.54, making some investors believe the current trading level could be a solid buying opportunity.

It is quite possible that investors overreacted when selling DOYU last month following regulatory scrutiny. Though DUYA might not be able to merge with HUYA due to this scrutiny, that does not change the fact that DOYU is China’s second most popular online gaming provider.

HUYA’s Merits

HUYA’s forward P/E is a bit higher than DOYU’s, coming in at 35.16. HUYA is currently trading about $8 below its 52-week high of $36.33. HUYA’s interactive broadcasting service empowers observers to watch and interact with gamers, musicians, and reality show stars in real-time.

HUYA is clearly capitalizing on Generation Z, and the Millennial generation’s willingness to watch video games played at the highest level as opposed to playing those games on their own. After all, it is cheaper to watch others play games than to buy a video game console and games. Furthermore, hundreds of millions of people watch sports even though they could play them for free on their own, meaning the video game-watching phenomenon parallels the gigantic sports entertainment industry.

In short, HUYA should be viewed as China’s version of Twitch, a live streaming gaming service owned by Amazon (AMZN). HUYA’s average monthly users are trending toward the 200 million benchmark, representing a nearly 20% rise from merely one year ago. HUYA makes money through advertisement monetization.

DOYU Vs. HUYA in the POWR Ratings

HUYA has an A grade in the Momentum component of the POWR Ratings. The stock has C grades in the Quality, Value, and Growth components. If you are curious about how HUYA fares in the remaining components, such as Stability and Sentiment, you can find out by clicking here. Of the 86 publicly traded companies in the China industry, HUYA is ranked 30th. You can find top stocks in the China industry by clicking here.

DOYU has an A grade in the Momentum component of the POWR Ratings. The stock has a B grade in the Quality and Value components. If you are curious about how DOYU fares in the remaining components of Sentiment, Stability, and Growth, you can find out by clicking here. DOYU is ranked 30th of 65 stocks in the Consumer Goods industry. Investors can find top stocks in the industry by clicking here.

The Analysts’ Take on DOYU and HUYA

Analysts are quite bullish on DOYU, establishing an average price target of $105.10. If DOYU reaches this price, it will have popped by more than 542%. The stock’s highest price target is $115.85. Analysts’ lowest price target for DOYU is $95.99.

The analysts are also quite bullish on HUYA, setting an average price target of $174.47. If the stock were to ascend to this level, it would have increased by a whopping 476.95%. The analysts’ highest price target for the stock is $198.60, while its lowest is $145.64. 

Which is the Better Stock?

This is a difficult call to make. When in doubt, check the POWR Ratings. Both HUYA and DOYU have C POWR Ratings grades, which makes them potential holdings once they become a B or A. But between them, DOYU has more A and B grades, ultimately making it the better stock now.

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DOYU shares were trading at $15.03 per share on Friday morning, up $0.08 (+0.54%). Year-to-date, DOYU has gained 35.90%, versus a 2.62% rise in the benchmark S&P 500 index during the same period.

About the Author: Patrick Ryan

Patrick Ryan has more than a dozen years of investing experience with a focus on information technology, consumer and entertainment sectors. In addition to working for StockNews, Patrick has also written for Wealth Authority and Fallon Wealth Management. More…

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