Shares of Huya Inc. (HUYA), a leading game live streaming platform in China, plummeted nearly 9% on Tuesday after Bank of America downgraded the stock and lowered its price target, citing concerns over the weakening performance of the company's core streaming business.

In a research note, BofA analyst Lei Zhang cut Huya's rating from Buy to Neutral and reduced the price target from $5.80 to $4. The analyst expressed concerns that Huya's core live-streaming business continues to see weakness amid the macro slowdown and tightening regulatory environment in China.

According to BofA, Huya's average revenue per user (ARPU) is likely to see a quarter-on-quarter decline in the second half of 2024 due to conservative spending from different user groups. Additionally, the company's streaming business is undergoing adjustments to comply with tightened regulations, further weighing on its performance.

While Huya's new game advertising and game operations businesses are seeing faster growth, which can help offset some of the impact from the weaker streaming business, BofA noted that these markets are highly competitive. The firm also cautioned that Huya's new businesses could start to face a high base effect in 2025, potentially limiting their growth potential.

Despite the concerns, BofA maintained a price target of $4 for Huya stock, implying an upside potential of 22.7% from its current level after Tuesday's steep sell-off.