Bilibili Earnings: Uncertainties on the Gaming Segment Leads to Lower Valuation

We lowered Bilibili’s fair value estimate by 11% to $34 as management cut revenue guidance following the removal of Pretty Derby from Chinese mobile app stores because of language translation issues. Despite rising near-term uncertainties related to the gaming segment, the firm keeps its breakeven timeline unchanged, so we see no reason to alter our long-term assumptions materially. Although shares are trading at a significant discount to our fair value estimate, we believe concerns over the timing of Pretty Derby’s return and the firm’s near-term gaming pipeline could continue to pressure share price performance. Hence, investors may be able to collect the shares at more attractive prices.