Tiger Securities has initiated coverage on BlueCity Holdings Ltd. (Nasdaq: BLCT) with a "buy" rating and a price target of $21 per share, about 40% premium from today's closing price of $14.98 per American depositary share.
Despite the ongoing pandemic, analysts from Tiger Securities see a huge potential for BlueCity's profitability, given the company's "sticky user base with high propensity to pay.”
“1Q20 numbers were impacted by seasonality and Covid-19, but the company has a long runway to acquire users both domestically and internationally,” analysts wrote. “Margins will improve due to hyper growth of the membership business, operating leverage, as well as lowering of revenue sharing costs.”
Tiger Securities expect BlueCity’s revenue to grow more than 40% this year and 37% in 2021, and they estimate the company’s operating margin will break even in 2022.
Earlier this week, Loop Capital Markets initiated coverage of BlueCity with a "buy" and a $20 per share price target.
Loop Capital's Laura Champine, director of research, noted the growing livestreaming trend, accelerated by the Covid-19 outbreak, as well as BLCT's monetization opportunities and its position in an attractive niche.
"As Asian societies gradually become more open to the LGBT community, we expect more community members to reach out to their peers digitally," Champine wrote.
Further, "The Blued app has more experience and more members than any other sizeable LGBTQ platform in Asia, and management knows how to make its users feel safe and connected. We believe the app's rapid growth outside of China demonstrates the company's ability to navigate in the fastest growing markets in Asia, including India, Vietnam, Thailand, and Korea."
BueCity operates the largest LGBTQ online platform in Asia, Blued, counting more than 6 million active users as of March 2020. Of those, 42% are daily active users. While the majority of the users on the app are gay men, the company expects to expand its lesbian base. Loop Capital mentions the partnership with Rela, China's top social lesbian network, as a possibility for the future.
In addition to social features, BlueCity offers various services including HIV awareness and prevention, medical consultation and health services, and family planning.