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Niche Investment, but Bilibili’s Growth Is Irrefutable

Buying an asset that one doesn’t understand is definitely not a recommended practice. That’s why it’s essential to know what Bilibili (NASDAQ:BILI) does, and what audience it serves, before considering owning BILI stock.

To get the full picture with Bilibili, you’ll need to delve into the company’s fundamentals, without a doubt. Yet, there’s more to investing than just parsing the numbers. This is especially the case when it comes to BILI stock, as the cultural element is vital to the continued growth of this company.

There's a Very Bumpy Ride Upwards in Store for BILI Stock
Source: rafapress / Shutterstock.com

So far though, Bilibili’s growth has been substantial. Granted, Bilibili is still working towards positive earnings. If that’s a deal breaker for you, so be it. But before you write Bilibili off completely, you might want to follow along as we unpack the inner workings of this decidedly modern company.

A Closer Look at BILI Stock

There’s really no way to get a comprehensive view of BILI stock unless we examine its price action. June in particular has been good to Bilibili’s investors as the shares have spiked from $33 to the $45 area in a very brief time frame.

That type of price movement, however, isn’t unusual for BILI stock. The price is prone to periods of sideways action followed by occasional big pops. Of course, that’s not a guarantee that this pattern will continue going forward.

As for the novel-coronavirus crisis, there was a negative impact on the BILI share price, but it wasn’t sustained for very long. Now that the shares are trading near their all-time highs, it’s important to check Bilibili’s fundamental statistics in order to maintain confidence that the positive momentum can continue.

Streaming Content… and Revenues

Bilibili is primarily known as a Chinese video-content-streaming platform that’s not dissimilar to YouTube. Unlike YouTube, however, Bilibili tends to target a younger audience with a focus on Generation Z.

Thus, anime cartoons are typical content fare on Bilibili. In general, one might expect to see plenty of fast-paced content geared towards teens and tweens. By just about any metric, this strategy is working extremely well for Bilibili.

In 2020’s first quarter, Bilibili absolutely knocked it out of the park:

  • The total net revenues came to 2,315.5 million RMB (the equivalent of $327 million), representing year-over-year growth of 69%.
  • Bilibili’s average monthly active users during the first quarter totaled 172.4 million, indicating a 70% year-over-year increase.
  • The company posted 156.4 million average monthly active mobile users for the quarter, signifying a 77% improvement compared to the same quarter of the previous year.
  • Moreover, Bilibili’s average monthly paying users for the quarter came to 13.4 million, implying a 134% increase year-over-year.

Helped by the Pandemic?

So, Bilibili CEO and Chairman of the Board, Rui Chen, has every right to brag that his company “kicked off 2020 with a stellar set of results.” And apparently, Chen isn’t the only individual with an optimistic view on Bilibili.

To wit, JPMorgan analyst Alex Yao seems to have a decidedly bullish outlook on Bilibili. He assigned BILI stock a price target of $42 while upgrading the shares from “Neutral” to “Buy.”

Perhaps more interesting that Yao’s upgrade, however, is his rationale:

“[I]t was the steady or even improving engagement metrics… in spite of the strong user growth, which makes us believe strong user growth remains achievable in the next 1-2 years, as a virtuous cycle between content and user base has been formed and reinforced by COVID-19.”

Dare he suggest that Covid-19 helped Bilibili and will continue to do so? It’s an unusual reason to lean bullish on BILI stock, but there may be merit to the argument. After all, cooped-up Gen-Z-ers love to watch videos regardless of their geography.

The Bottom Line

Many Americans probably aren’t aware of Bilibili and U.S.-based traders might consider BILI stock a very niche investment. Fair enough, but instead of ruling out a stock because of its specificity or its exotic nature, perhaps instead we can seek to understand it. It requires more effort and an open mind, but the payoff could be substantial.

As of this writing, David Moadel did not hold a position in any of the aforementioned securities.

Article printed from InvestorPlace Media, https://investorplace.com/2020/06/its-a-niche-investment-but-bili-stocks-growth-is-irrefutable/.

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