So the competitor of Douyin (TikTok) in China, Kuaishou (HKEX: 1024) just went IPO this week, now valued at ~$160 billion.
It’s a well-known app in China – with the current market sentiment, hypes around video-based social platforms, I should say I am not surprised about the valuation.
Here I provide one way to look at Kuaishou’s valuation:
Q3 revenue is ~$2.4 billion:
1/ ~50% comes from live-streaming (virtual gifts).
2/ The rest is from ads and e-commerce. I categorize them as “good” revenues that are fast growing (+200% yoy for ads) and stable.
For the first part, virtual gifts, we can use Huya (most revenue is from live-streaming) as a comp – about 3x annualized revenue.
For the second part, we can compare it with Snap, which trades at 25x annualized revenue. Kuaishou’s ads business (~$900 million in Q3) is at the same scale as Snap and grows faster – so some can argue to use 30x.
Therefore,
Kuaishou = virtual gifts business x 3 + ads & other business x 30
As virtual gifts is 50% now, we are talk about 16.5x revenue as a whole.
Annualize it: $2.4 billion x 4 x 16.5 = $158.4 billion
Virtual gifts business is debatable – while it’s 50% of revenue, it accounts for less than 20% of Kuaishou’s value if we use the above framework. So change it from 3x to 2x or 1x won’t affect much actually.