R enewed optimism about improved cooperation between the United States and China has brought life back into Chinese tech stocks like Bilibili ( BILI ) which has been under pressure for most of the year.
The Chinese video sharing website is not exactly household name here in the U.S., but the company’s entertainment social platform, which lets users post messages about brief videos in real time, has consistently grown over the past several years.The stock, however, which is down 73% year to date, has not reflected the website’s popularity.Ahead of the the company third quarter fiscal 2022 earnings results which is due out before the opening bell Tuesday, investors want to know if now is an ideal time to scoop up some cheap shares.
Backed by three strong supporters in Alibaba ( BABA ), Sony and Tencent, Bilibili continues to improve on its commercialization initiatives evidenced by the rise in monthly paying users which last quarter reached 27.5 million, up 32% year over year.However, with a net loss that widen from the year earlier.Bilibili’s gross profit fell to $110.2 million from $137 million in the year-ago quarter.
While the company continues to grow its user base and controlling costs, profitability continues to suffer.The market is hoping that improved cooperation between the United States and China will help.
President Joe Biden and Chinese President Xi Jinping said that the two nations would have more frequent communications.While acknowledging that the U.S.’s One China policy has not changed, Biden said the U.S.
is not looking for conflict with the world’s most populous country.In response, among other Chinese stocks, Bilibili stock rose by double digit percentage points, rising more than 20% over the past thirty days.For upward movement to last, Bilibili on Tuesday must show improved profitability metrics.
For the quarter that ended September, Wall Street expects Bilibili to post a loss of 65 cents per share on revenue of $798.52 million.This compares to the year-ago quarter when it lost 65 cents per share on revenue of $723.44 million.
For the full year, ending in January, the loss is expected to be $2.55 per share, compared to a loss of $2.00 a year ago, while full-year revenue is expected to rise 13.9% year over year to $3.07 billion.
Bilibili hasn’t escaped 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 where its Covid-related lockdowns have ravaged its operating metrics.But with an estimated 80% user base being younger than 35 years old, Bilibili has become China’s go-to video platform for the young generation.The question remains whether Bilibili’s rate of growth can translate into sustainable profits.
Second quarter revenues grew 9% year over year to $732.9 million, driven by robust demand in its value-added services which offset a double-digit decline in mobile game revenues.
During the quarter, average monthly active users reached 305.7 million, a 29% increase year over year, while average daily active users reached 83.5 million, up 33% year over year.As noted, the net loss widened from the year earlier, with Q2 gross profit falling some 20% year over year to $110.2 million.
The company’s struggles with profitability aside, it appears that analysts are expecting modest improvements given that the consensus adjusted loss estimate has narrowed over the past sixty days from 71 cents to 65 cents.This suggests that analysts are somewhat more optimistic about the company’s earnings trend.On Tuesday, if Bilibili can show improved user metrics, while outlining its path towards profitability, the stock is poised to keep rising.
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