The shares of leading online user-generated content (UGC) audio company Lizhi Inc. (LIZI) have rallied 229.7% over the past six months to close Friday’s trading session at $11.31. This impressive performance can be attributed primarily to increasing demand for the company’s in-car audio products by EV makers such as XPeng Inc. (XPEV).

LIZI was among the first 10 Guangdong-based online audiovisual companies selected to participate in a local government-backed pilot program in October 2020.

The stock spiked as much as 45% on March 16 after short-seller Citron Research set a target price of $30 for the stock, which represented a potential upside of 184%. As the company continues to improve its offerings, leveraging its artificial intelligence (AI)-centric business model, it is expected to thrive this year and beyond.

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Here’s what we think could shape LIZI’s performance in the near term:

Increasing Demand for LIZI’s In-Car Audio Products

Last December, LIZI collaborated with XPEV, a leading Chinese smart EV company, to integrate its in-car audio content product into XPEV’s in-car intelligent operating system. LIZI is expected to gain significantly from this collaboration, leveraging its comprehensive content library, leading-edge technologies and strong operating capabilities in audio-centric user communities.

The company also entered  a cooperation agreement with two wholly-owned subsidiaries of Guangzhou Automobile Group Co., Ltd. — GAC AION New Energy Automobile and GAC Motor — in  December. LIZI  partnered with BYD DiLink in December and with ECARX this month  to integrate its in-car audio products.

Growth of Tiya App

Last October, LIZI entered the dating market with the launch of audio-based social networking app Tiya in the U.S. market. The app has already become popular with consumers  and is expected to grow significantly in the coming months, thereby leveraging its AI-driven user matching system. In fact, the app was ranked among the top four social networking apps in the U.S. in November, according to a ranking published by App Annie. It was also ranked among the top 10 social networking apps in approximately  70 countries.

Favorable Analyst Estimates

Analysts expect LIZI’s revenue to increase 35.5% for the quarter ending June 30, 2021 and 22.3% in fiscal 2021. Its EPS is expected to grow 86.4% for the current quarter, ending March 30, 2021, by more than 57% for the next quarter ending June 30, 2021 and 80.5% in fiscal 2021.

POWR Ratings Reflect LIZI’s Promising Outlook

LIZI has an overall B rating, which equates to Buy in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight different categories. LIZI has a B grade for Momentum also, which is in sync with its 229.7% gains over the past six months and 220.4% over the past three months.

It’s not surprising that LIZI also has a B grade for Value. This is consistent with its forward enterprise value/sales of 1.66x, which is 40.4% lower than the industry average  2.79x.

We have graded LIZI for Growth, Stability, Sentiment and Quality as well. Get all LIZI’s ratings here.

LIZI is ranked #4 of 11 stocks in the A-rated Entertainment – Broadcasters industry.

Click here to access five other top-rated stocks in the same industry.

Bottom Line

The fast-growing company has not only been seeing  increasing demand for its in-car audio products from  EV makers but is  entering new market spaces, such as dating networks. So, we think LIZI is well-positioned to continue  benefiting from its diversified portfolio.

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LIZI shares were trading at $10.70 per share on Monday morning, down $0.61 (-5.39%). Year-to-date, LIZI has gained 175.77%, versus a 4.78% rise in the benchmark S&P 500 index during the same period.

About the Author: Manisha Chatterjee

Since she was young, Manisha has had a strong interest in the stock market. She majored in Economics in college and has a passion for writing, which has led to her career as a research analyst. More...

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