UBS Group AG initiates coverage on JOYY, Inc. Sponsored ADR Class A (JOYY.US) with a "buy" rating: target price of $80, bullish on fundamental growth drivers driving revaluation.

Recently, UBS Group AG released its first coverage report, giving JOYY, Inc. Sponsored ADR Class A group (JOYY.US) a "Buy" rating with a target price of $80. UBS Group AG believes that with the company completing a valuation reset through enhanced shareholder return by 2025, the market's focus on JOYY, Inc. Sponsored ADR Class A group is expected to gradually shift from "high shareholder returns" to "fundamental growth", driving the company to a new round of value reevaluation. AI-driven programmatic advertising is facing global structural growth opportunities UBS Group AG pointed out in the report that JOYY, Inc. Sponsored ADR Class A group's fundamentals are showing signs of stabilizing and improving. The bank expects the company's revenue and adjusted operating profit to grow by 10% and 13% respectively year-on-year in 2026. The core live broadcasting business is trending towards stability, while new growth engines such as AI-driven programmatic advertising are opening up new growth opportunities for the company. In terms of business structure, UBS Group AG is particularly optimistic about the development potential of JOYY, Inc. Sponsored ADR Class A's advertising business. The report shows that JOYY, Inc. Sponsored ADR Class A disclosed revenue from BIGOAds for the first time in the third quarter of 2025. This business accounts for about 22% of the company's revenue, and its growth rate continues to increase, with year-on-year growth of 33% and 62% in the third and fourth quarters of 2025 respectively. UBS Group AG believes that programmatic advertising has clear structural growth logic, including increased advertising efficiency driving increased advertiser budgets, a shift in advertising budgets towards performance advertising, and the consolidation of profits in the industry chain to programmatic advertising platforms. UBS Group AG further stated that BIGOAds' growth advantage mainly comes from its one-sided traffic base and its first-mover advantage in non-gaming verticals. With the increase in the proportion of advertising revenue, enhanced business transparency, and further refinement of relevant business disclosures starting from the first quarter of 2026, the advertising business is expected to become an important factor driving the valuation improvement of JOYY, Inc. Sponsored ADR Class A. "Cash cow" live broadcasting business shows steady growth, supporting solid shareholder returns In addition to the advertising business, UBS Group AG believes that the live broadcasting business remains a stable "cash cow" segment for JOYY, Inc. Sponsored ADR Class A group. The report points out that JOYY, Inc. Sponsored ADR Class A is currently focusing more on high-quality growth, mainly reflected in continuous operational optimization, focus on developed markets and user engagement, and improvement in revenue efficiency through AI. UBS Group AG mentioned that the company's revenue has shown quarter-on-quarter growth since the second quarter of 2025, reflecting the gradual manifestation of operational optimization and laying a foundation for future steady growth. In terms of profitability and cash flow, UBS Group AG predicts that JOYY, Inc. Sponsored ADR Class A group's compound annual EBITDA growth rate from 2025 to 2027 will reach 14%. With controllable capital expenditures, the company is expected to continue generating $250-300 million in free cash flow, providing support for shareholder returns. Valuation has room for upward revision, 11% shareholder return rate provides downside protection UBS Group AG used a sum-of-the-parts valuation (SOTP) to derive a target price of $80, with cross-validation using the DCF valuation method. The bank stated that JOYY, Inc. Sponsored ADR Class A's current stock price corresponds to approximately 10 times the expected 2026 earnings per share, offering a good risk-reward ratio; as profitability recovers and market recognition of AI-empowered advertising business growth increases, there is further upward valuation repair potential for the company. At the same time, UBS Group AG believes that JOYY, Inc. Sponsored ADR Class A is currently valued close to a "net cash transaction" status, and the approximately 11% shareholder return rate (7% dividend yield + 4% share buyback rate) also provides some downside protection for the stock price.