Bilibili Shares Drop Despite Positive Earnings

By Tracy Qu

Bilibili's Hong Kong-listed shares fell sharply after quarterly earnings, even as analysts said they largely liked what they saw from the Chinese videogame specialist.

Shares were 11% lower at 107.00 Hong Kong dollars (US$13.70) in afternoon trading Friday, trimming gains this year to 14%. The company's U.S.-listed ADRs slumped 12% overnight to US$13.74.

The Shanghai-based video-sharing and gaming company reported a 12% rise in first-quarter revenue, helped by a big rise in contributions from advertising, which makes up about a third of total revenue. Its net loss widened from a year earlier, while adjusted net loss was more than halved. The company attributed the deeper net loss to a debt-extinguishment gain in the year-earlier period.

Nomura analysts Jialong Shi and Rachel Guo said in a research note that revenue was in line with estimates, while the adjusted net loss was better than expected.

"We were encouraged to see that Bilibili is on track to meet its near-term target [of] achieving break-even in third quarter," they said. However, Shi and Guo said they remain cautious about whether the company can deliver sustainable margin expansion in the long term.

Citi analysts led Brian Gong raised their 2024 and 2025 revenue forecasts by 2% and 1%, respectively, to reflect "decent advertising momentum," they wrote in a note. They kept a neutral rating while raising the target price on ADRs to US$15.50 from US$13.50.

Daiwa analyst John Choi raised his 2024-2026 revenue projections by 0.4%-1.4% on "strong ads momentum and improving game pipeline." He forecast advertising revenue to grow 28% in the second quarter. Choi kept a hold rating and raised the target price to HK$115.00 from HK$93.40.

"It seems that the recent drop in share prices may be more attributable to market sentiment rather than underlying financial issues, as indicated by the solid first-quarter earnings," Morningstar analyst Ivan Su said.

Bilibili shares significantly underperformed the Hang Seng Tech Index's 2.3% decline Friday and are on track for their biggest one-day percentage drop this year.

Write to Tracy Qu at tracy.qu@wsj.com

(END) Dow Jones Newswires

May 24, 2024 02:07 ET (06:07 GMT)

Copyright (c) 2024 Dow Jones & Company, Inc.