Ricardo Pillai
2 min read
In This Article:
We came across a bullish thesis on Yalla Group Limited (YALA) on Value Investing Subreddit Page by chadwinco. In this article, we will summarize the bulls’ thesis on YALA. Yalla Group Limited (YALA)'s share was trading at $7.20 as of May 9th. YALA’s trailing P/E was 9.73according to Yahoo Finance.
A close-up view of hands holding a modern gaming device, highlighting the company's mobile games.
Yalla operates a portfolio of culturally tailored voice-chat and gaming apps for Arabic-speaking users across the MENA region and Turkey, including its flagship Yalla app and hit mobile games like Yalla Ludo and 101 Okey Yalla. The company has carved out a dominant niche by offering localized user experiences that resonate with regional preferences, helping it maintain a 15% market share in the fast-growing MENA mobile entertainment sector. From 2021 to 2024, revenue grew steadily from $273 million to $340 million, with operating margins expanding to a robust 36%. Yalla’s asset-light model enables high free cash flow margins—close to 50%—with minimal capital requirements, further supported by upfront customer payments. Its pristine balance sheet, featuring $654 million in cash and no debt, translates to roughly $3.57 in net cash per share, offering downside protection. Despite its strong fundamentals, the stock trades at an undemanding 9x earnings and under 6x EV/EBITDA, significantly below global gaming peers. Near-term catalysts include two new game launches in late 2025, an ongoing $150 million share buyback (up to 15% of shares), and potential revenue inflection as gaming overtakes chat as the dominant segment. While competitive pressure from firms like Tencent, TikTok Live, and regional players exists, Yalla’s deep cultural integration and user base stickiness give it a competitive edge. Risks include regulatory shifts in UAE tax law, operational dependence on a few payment processors, and geopolitical instability. Nevertheless, even under conservative assumptions, the stock appears undervalued with a fair value estimated between $8.90 and $14 per share.
Yalla Group Limited (YALA) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 6 hedge fund portfolios held YALA at the end of the fourth quarter which was 4 in the previous quarter. While we acknowledge the risk and potential of YALA as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than YALA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
