YY Inc’s (YY) stock may be undervalued because U.S. investors don’t fully recognize the opportunity in the Chinese online music market, according to Maxim Group LLC Analyst Echo He. She says Chinese online music is a newer, growing market that is both scalable and profitable. Further, she says YY is a leader in the market, creating an opportunity for investors.
“This online music market, more or less, is similar to the existing online game market. People go online to watch live music performances — there is a host in each video channel; users can register and watch for free; if they like it, they can pay for virtual gifts to these hosts,” He says. “YY takes 60% of whatever users spend online.”
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He says the online music market is essentially stimulating the existing online gaming business. She says online music makes money from individual online users based on their entertainment demand.
“In China these kinds of entertainment activities are in high demand — the regular entertainment activities that we take for granted in this country, like sports, music and all kinds of shows, do not exist,” He says.
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