Japanese messaging app company Line (LN) soared in its trading debut on the New York Stock Exchange, posting the strongest start among this year’s tech IPOs.
BACKGROUND: Line’s mobile messaging platform offers free text messaging, voice and video, as well as games, music and online-to-offline services such as payments, restaurant bookings and ride hailing. In a July 11 prospectus for its initial public offering, Line noted it had 218M monthly active users globally in March, with 152M of those located in Japan, Taiwan, Thailand and Indonesia. “In recent quarters, we focused our marketing efforts on our key countries as a part of our increased emphasis on monetization in markets where we have achieved leading market positions… We plan to continue to focus on areas in which we enjoy competitive advantages and to allocate resources effectively,” the company added.
JEFFERIES SAYS BUY: Jefferies analyst Atul Goyal initiated coverage of Line with a Buy rating today, arguing the messaging platform holds a near-monopoly in Japan, similar to Tencent’s (TCEHY) grip on China or Facebook’s (FB) dominance in the west. Though revenue from its games and messaging stickers is plateauing, the company picked up the baton in its advertising business, says Goyal, who noted he is “impressed” with management’s quick pivot at such a healthy moment in the mobile ad space. Line is prioritizing the so-called JITT markets — Japan, Indonesia, Taiwan and Thailand — where it has led average monthly user growth of 30% in the last 12 months, and decreasing its focus on non-JITT, which Goyal sees as a sound strategy given the importance of a “winner-takes-all” strategy for a messaging app. Among the risks faced by the newly-listed company is Nintendo (NTDOY), said the analyst. The Japanese gaming giant’s “Pokemon Go” has recently dominated mainstream news, and Goyal warns of potential impact from Nintendo — which has decades of experience in portable gaming — pushing into the mobile game space.
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