Where to begin:
Global investment bank J.P. Morgan has released a new research report, assigning an "Overweight" rating to JOYY Inc. (JOYY.US) with a price target of $98. Based on the closing price of $74.16 on August 12, this target implies approximately 32% upside potential.
The report highlights that since January 2025, JOYY's stock has significantly outperformed the KWEB index, with JOYY rising 101% versus KWEB's 6% gain. The bank attributes this performance to two core factors: substantial shareholder returns and the steady growth of the BIGO Ads business, both of which are expected to drive the stock price higher.
The report examines JOYY's shareholder return policy. Data shows that from 2020 to the present, JOYY has returned over $2 billion to shareholders, representing more than 50% of the company's current total market capitalization. In 2025, the company returned $332 million to shareholders through cash dividends and share repurchases, accounting for 9% of its market value. In May 2026, JOYY updated its shareholder return plan, aiming to complete $1.5 billion in shareholder returns by the end of 2028, with 60% allocated as quarterly dividends and 40% for share buybacks. J.P. Morgan estimates this plan implies an annual shareholder return rate of 15%.
The report points out that this sustainable return is supported by the company's ample net cash reserves and strong cash flow generation capabilities. J.P. Morgan projects that JOYY's free cash flow will be $220 million in 2026 and $317 million in 2028. Based on this, analysts believe JOYY has sufficient capital to maintain sustainable shareholder returns beyond 2028, further estimating that even if the stock price rises 50% from current levels, the company could still achieve a 10% annualized shareholder return.
BIGO Ads revenue has grown more than fivefold, with industry expansion and data advantages highlighting growth potential:
On the business front, J.P. Morgan highly praises the growth prospects of BIGO Ads. The report shows that BIGO Ads revenue has grown more than fivefold since 2023 and continues to expand rapidly, with year-over-year growth of 56% in the first quarter of 2026. Meanwhile, comparable businesses at Mobvista and AppLovin grew 33% and 59% respectively during the same period, indicating sustained high sentiment in the global open internet programmatic advertising market. J.P. Morgan believes that, supported by ongoing industry expansion and its own data and algorithm capabilities, BIGO Ads revenue will achieve a compound annual growth rate of 39% from 2027 to 2028, driving year-over-year increases of 19% and 30% in the company's overall net profit and operating profit, respectively.
J.P. Morgan also notes that BIGO Ads' proprietary data in digital entertainment (Likee/Bigo Live) and e-commerce (SHOPLINE) verticals provides a differentiated data foundation for its advertising model, offering a strategic advantage for growth. Additionally, as algorithms continue to optimize and ad delivery efficiency improves, BIGO Ads is expected to further enhance monetization efficiency while maintaining a strong return on ad spend for advertisers, thereby boosting the advertising segment and the group's overall profit growth. The report suggests that BIGO Ads has formed a self-reinforcing virtuous growth flywheel: expanding traffic generates more user data, which optimizes AI models, delivering higher ad spend returns for advertisers, attracting more ad budgets, and further driving traffic expansion.
Based on this logic, J.P. Morgan uses a sum-of-the-parts (SOTP) valuation method, assigning a $98 price target to JOYY. The digital entertainment business is valued at 6 times expected 2027 price-to-earnings ratio, while BIGO Ads is valued at 1 times expected 2027 price-to-sales ratio, higher than the 0.7 times of comparable company Mobvista, which J.P. Morgan believes is justified by BIGO Ads' faster growth. Additionally, the company's ample net cash is a significant support to the valuation, accounting for 64% of the total SOTP valuation. J.P. Morgan concludes in its report that the core logic for being bullish on JOYY lies in: the current shareholder return plan providing an annualized shareholder return of approximately 15%, supported by ample net cash and robust operating cash flow for long-term sustainability; and, BIGO Ads, leveraging differentiated data and algorithm advantages in the high-growth programmatic advertising market, is emerging as a new growth engine for the company.