JPMorgan is bullish on JOYY, Inc. Sponsored ADR Class A (JOYY.US): Target price of $98, giving it an "Overweight" rating.

Recently, international investment bank J.P. Morgan released a latest research report, giving the stock rating of JOYY, Inc. Sponsored ADR Class A (JOYY.US) an "Overweight" and setting a target price of $98. Based on the closing price of $74.16 on August 12, this target price implies an upside potential of about 32%. The report highlights that since January 2025, JOYY, Inc. Sponsored ADR Class A's stock price has significantly outperformed the KWEB index (JOYY, Inc. Sponsored ADR Class A has risen by 101%, while KWEB has increased by 6%). The bank believes that two key factors drive this performance: substantial shareholder returns and the robust growth of the BIGO Ads advertising business, both of which will jointly push the companys stock price higher. The annualized return for shareholders is approximately 15%, supported by abundant cash reserves for long-term sustainable returns. The report focuses on JOYY, Inc. Sponsored ADR Class A's shareholder return policy. Data shows that from 2020 to present, JOYY, Inc. Sponsored ADR Class A has returned over $2 billion to shareholders, accounting for more than 50% of the company's current total market value; in 2025, the company will return $332 million to shareholders through cash dividends and stock buybacks, which corresponds to 9% of market value. In May 2026, JOYY, Inc. Sponsored ADR Class A updated its shareholder return plan, aiming to complete a total of $1.5 billion in shareholder returns by the end of 2028, with 60% allocated to quarterly dividends and 40% for stock buybacks. J.P. Morgan estimates that this plan "implies an annual shareholder return rate of 15%." The report indicates that the companys sustainable returns are supported by ample net cash reserves and strong cash flow generation capabilities. J.P. Morgan forecasts the company's free cash flow will be $220 million and $317 million in 2026 and 2028, respectively. Based on this, analysts believe that JOYY, Inc. Sponsored ADR Class A has sufficient capital to maintain sustainable shareholder returns beyond 2028, and further estimate that if the stock price rises 50% from its current level, the company can still achieve a 10% annualized shareholder return. BIGO Ads revenue has grown more than fivefold, with industry expansion and data advantages highlighting its growth potential. On the business front, J.P. Morgan highly evaluates the growth prospects of BIGO Ads. The report shows that since 2023, BIGO Ads revenue has increased more than fivefold and continues to grow rapidly, with a year-over-year increase of 56% in the first quarter of 2026. Meanwhile, Mobvista and AppLovin's respective related businesses saw year-over-year growth of 33% and 59% in the same period, indicating that the global open internet programmatic advertising market remains highly prosperous. J.P. Morgan believes that under continuous industry expansion and its own data and algorithm capabilities, BIGO Ads revenue will achieve a 39% compound annual growth rate from 2027 to 2028, driving the company's overall net profit and operating profit to increase by 19% and 30% year-over-year, respectively, during the same period. J.P. Morgan also points out that BIGO Ads has proprietary data in the vertical fields of digital entertainment (Likee/Bigo Live) and e-commerce (SHOPLINE), which provides a differentiated data foundation for its advertising model and gives BIGO Ads a strategic advantage for growth. Furthermore, as the algorithms continue to optimize and advertising efficiency improves, BIGO Ads is expected to enhance monetization efficiency while maintaining good ROAS for advertisers, thereby driving profit growth in the advertising sector and the overall group. The report proposes that BIGO Ads has formed a self-reinforcing virtuous growth cycle: continuously expanding traffic generates more user data, which further optimizes AI models, delivering higher ad spending returns for advertisers, attracting more advertising budgets, and further driving traffic expansion. Based on this rationale, J.P. Morgan adopts a sum-of-the-parts (SOTP) valuation method, giving JOYY, Inc. Sponsored ADR Class A a target price of $98. Among them, the digital entertainment business is based on a projected 2027 price-to-earnings ratio of 6x; BIGO Ads is valued based on a projected 2027 price-to-sales ratio of 1x, higher than the comparable company Mobvista's 0.7x, as J.P. Morgan believes this valuation premium primarily comes from BIGO Ads' faster growth. Additionally, the companys ample net cash also constitutes an important support for valuation, accounting for 64% of the total SOTP valuation. J.P. Morgan concludes in the report that the central logic for its positive outlook on JOYY, Inc. Sponsored ADR Class A is: the current shareholder return plan corresponds to about a 15% annualized shareholder return, with abundant net cash and robust operating cash flow supporting long-term sustainable shareholder returns; at the same time, BIGO Ads, with its differentiated data and algorithm advantages, is becoming the company's new engine of growth in the rapidly growing programmatic advertising market.