On Wednesday, Citi analysts, led by Brian Gong, adjusted their outlook on Bilibili (NASDAQ:BILI), reducing the price target to $20.50 from the previous $22.00 while maintaining a Neutral rating for the stock. The revision comes ahead of the company's anticipated fourth-quarter 2024 earnings report, which is expected around the end of February. Citi forecasts Bilibili's revenue and adjusted earnings to align with the Bloomberg consensus for the quarter.
The company's gaming revenue is projected to stay relatively stable in Q4 2024, based on recent performance data from the game "Three Kingdom (TADAWUL:4280)." However, advertising growth might experience a slight deceleration due to tougher year-over-year comparisons, though it's still projected to be at a decent level. Looking into 2025, Citi anticipates that the more favorable comparisons for gaming revenue will continue into the first half of the year, with potential boosts coming from new title releases in the latter half.
Despite the potential for a slowdown, advertising is expected to remain a primary growth driver for Bilibili. Nevertheless, Citi has adjusted its 2025 earnings estimates downward by 4%, factoring in possible increased marketing expenditures associated with the Spring Festival Gala, which could impact margins in the first quarter of 2025. The revised earnings estimate stands at Rmb1.9 billion.
The price target cut to $20.50 reflects Citi's valuation of Bilibili at 27 times its projected 2025 earnings. The analysts suggest that the stock's current price likely incorporates most of the positive aspects, prompting their decision to uphold a Neutral rating with a high-risk classification.
As Bilibili prepares to release its financial results, investors will be watching closely to see if the company's performance aligns with Citi's projections and how this might influence the stock's trajectory in the coming months.
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