Bank of America downgraded China's Huya (NYSE:HUYA) to "neutral," saying its core live-streaming business continues to see weakness amid macro slowdown and tightening regulatory environment, among other reasons.

Shares of the company closed 6% lower on Wednesday on the NYSE.

The ratings firm said it sees any additional dividend in the near term and views potential M&A opportunities as upside risks for the company. It also noted that positive shareholder return is largely priced in its valuation and hence do not expect any further special dividend any time soon.

"We see Huya’s live-streaming business showing further impact on macro slowdown amid the tightened regulatory environment. ARPU is likely to see QoQ decline in 2H24 due to conservative spending of different user groups. Also, streaming business adjustment is ongoing amid tightened regulation," BofA said on Wednesday.

"On the other hand, new game ad and game operations businesses see faster growth that can help to offset certain impact from the weaker streaming business, while game ad and game operations markets are competitive and Huya’s new businesses could start to have high base effect in 2025," BofA added.

HUYA has a PT of $4, implying an upside of 22.7%.