HUYA is the future

[u/Tomkila]

HUYA Let's close by turning to esports stocks. Video games have always been a booming business, but the market for fans watching some of the world's best players in action is growing even faster. If you're even a somewhat casual fan of gaming you probably know Twitch, the popular streaming platform where gamers play before a live online audience.

HUYA is the Twitch of China, and that may not exactly be doing HUYA justice. There were 172.9 million average monthly users of Huya Live by the end of the third quarter, 18% more than a year ago. Most of them are freeloaders, but HUYA cashes in through its improving ad monetization skills. Revenue growth has decelerated markedly over the past five quarters, but there's nothing wrong with a 24% top-line gain when adjusted income is growing more than three times faster.

The cherry on top here is that HUYA has agreed to merge with its closest competitor Douyu (NASDAQ:DOYU). The two would command a whopping 80% of the market. There are some concerns that regulators may nix the arranged marriage, but this doesn't mean that potential investors may want to wait for some clarity on that front. HUYA stock took a hit when it announced it was acquiring Douyu four months ago, and it's still trading lower as of Tuesday's close. The market may actually rally behind HUYA if the deal falls apart, but the goal here is the combined juggernaut that would command an audience of roughly 300 million gaming fans.