On Tuesday, BofA Securities updated its outlook on Bilibili (NASDAQ:BILI) shares, raising the price target to $18 from $17 while maintaining a Buy rating.
The adjustment follows Bilibili's first-quarter results, which aligned with expectations, showing improved advertising revenue growth and a positive gross profit margin (GPM) trend. The firm foresees a steady business growth trajectory through the second quarter and the rest of 2024.
The optimism from BofA Securities is partly due to Bilibili's advertising business, which is expected to continue its momentum during the 618 promotional period and through new game launches scheduled for the summer holidays.
The company's refined advertising products, including live streaming, video, and search ads, are anticipated to enhance ad pricing and dynamic ad load growth.
Furthermore, the integrated advertising system Bilibili offers is yielding cross-selling opportunities, evidenced by the fact that half of the advertisers who utilized the content creator ad function also invested in feed ads in the first quarter of 2024.
Bilibili's gaming segment is also projected to rebound, with several key game releases planned for the second to fourth quarters of 2024.
Titles such as "Wuhua Mixin," released on April 19, "SanMou," scheduled for June 13, and the upcoming "Heaven Burns Red" are expected to contribute to a resumption of year-over-year revenue growth from the second quarter of 2024.
The potential success of "SanMou," a highly anticipated strategy game, is particularly noted for its ability to drive further revenue upside.
The company's focus on loss control and a path to breakeven is expected to continue as planned, supported by the stronger performance in advertising and gaming.
BofA Securities suggests that it is premature to discuss the long-term margin profile post-breakeven, but they anticipate that a shift towards higher-margin advertising and gaming, combined with operational expenditure control, could lead to a long-term margin exceeding 10%.
As a result, BofA Securities has revised its earnings per share estimates upwards by 3%-5% for 2024-2026 and reiterated its Buy rating on the stock, encouraged by the positive advertising trends and the near-term game launches.
InvestingPro Insights
As Bilibili (NASDAQ:BILI) continues to navigate through 2024 with strategic shifts and product enhancements, InvestingPro data and insights offer additional context to BofA Securities' optimistic outlook. With a market capitalization of $5.75 billion, the company holds a significant position in the Entertainment industry. Despite not being profitable over the last twelve months, Bilibili has shown a strong return over the last three months, with a price total return of 44.16%. The company's revenue growth also remains positive, with a 5.51% increase over the last twelve months as of Q1 2024, and a notable quarterly revenue growth of 11.74% in Q1 2024.
An InvestingPro Tip highlights Bilibili's strong liquidity position, as the company holds more cash than debt on its balance sheet, which is a reassuring sign for investors considering the company's financial health. Additionally, despite not paying a dividend, Bilibili has a high shareholder yield, which could be a reflection of the company's potential for capital appreciation or share buybacks. For readers looking to delve deeper into Bilibili's financials and future prospects, InvestingPro provides a comprehensive suite of tools and metrics. By using the coupon code PRONEWS24, readers can get an additional 10% off a yearly or biyearly Pro and Pro+ subscription to access more than 6 additional InvestingPro Tips for Bilibili, helping investors make more informed decisions.
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