On this side of the hemisphere, Chinese video sharing website Bilibili (BILI) is anything but a household name. But the company’s entertainment social platform, which lets users post messages about brief videos in real time, continues to explode. But the stock hasn’t been as popular. Is now the time to buy?
The company is set to report first quarter fiscal 2022 earnings results before the opening bell Thursday. Shares of the Chinese video sharing platform hasn’t escape the wrath of the market’s displeasure for high-growth tech stocks that show a lot of promise but aren’t yet profitable. And it also hasn’t helped that the company only does business in China. Down 48% year to date, BILI stock has been punished, including respective declines of 56% and 77% in six months and twelve months.
However, as China’s go-to video platform for the young generation, with an estimated 80% user base being younger than 35 years old, there is tons of untapped potential for Bilibili. The company is backed by three strong supporters in Alibaba (BABA), Sony and Tencent. The latter owns a 13.3% stake, while Alibaba and Sony had respective stakes of 7.2% and 4.98%. With the support of its powerful backers, Bilibili has demonstrated a potent combination of growing its user base and keeping them engaged for long periods of time.
Its 272 million monthly active user base has more than doubled over the past two years. These trends makes Bilibili a compelling platform for investors who might have missed out on the likes of Facebook’s (FB) Instagram or to a lesser extent, Twitter (TWTR) and Snap (SNAP). The market, however, wants to know when the company can become profitable. Management on Thursday will need to outline its path towards profitability and sustained revenue growth to re-energize investors.
For the quarter that ended March, Wall Street expects Bilibili to post a loss of 63 cents per share on revenue of $757.99 million. This compares to the year-ago quarter when it lost 39 cents per share on revenue of $604.71 million. For the full year, ending in January, the loss is expected to be $2.40 per share, compared to a loss of $2.18 a year ago, while full-year revenue is expected to rise 19.5% year over year to $3.51 billion.
In addition to Bilibili’s rate of growth, combined with its diversified consumers services, including access to a variety of mobile games, the company’s paid members are also growing. And assuming it can better monetize its user base, profitability could arrive much sooner than expected. While the full-year loss is expected to widen by 12 cents per share, the company has established what analysts have called “a habit of overdelivering,” which has caused speculation about its profit potential.
In the fourth quarter, the company beat on both the top and bottom lines with revenue of $914.68 million surging 54% year over year, topping estimates by $3.6 million. Revenue growth was driven by a 15% rise in Mobile Games revenue and a 52% surge in Value-added services, reaching $297.3 million. Advertising revenue, which is how it monetizes those users, was also impressive, rising 120% to $249.1 million, while E-commerce revenue rose 35% year over year.
Just as impressive, average daily active users reached 72.2 million, a 34% increase, while monthly active users reached 271.7 million rising 35% year over year. Mobile monthly active users reached 252.4 million, also rising 35%. On Thursday analysts will want to see these positive trends continue. And if Bilibili can execute on its long-term growth objectives, the stock will respond in kind.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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Richard Saintvilus
After having spent 20 years in the IT industry serving in various roles from system administration to network engineer, Richard Saintvilus became a finance writer, covering the investor's view on the premise that everyone deserves a level playing field. His background as an engineer with strong analytical skills helps him provide actionable insights to investors. Saintvilus is a Warren Buffett disciple who bases his investment decisions on the quality of a company's management, its growth prospects, return on equity and other metrics, including price-to-earnings ratios. He employs conservative strategies to increase capital, while keeping a watchful eye on macro-economic events to mitigate downside risk. Saintvilus' work has been featured on CNBC, Yahoo! Finance, MSN Money, Forbes, Motley Fool and numerous other outlets. You can follow him on Twitter at @Richard_STv.
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