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Bilibili Stock Is Much Too Expensive After This Recent Pop

  • The video-sharing website Bilibili (NASDAQ:BILI) bounced nicely off its 52-week low in mid-March  
  • The Chinese entertainment stock had been on a downward slide for the past year
  • Investors ought to see if they can get BILI stock for less than $20 in the future
picture of bilibili logo on a phone
Source: rafapress / Shutterstock.com

I recently recommended 10 entertainment stocks to buy that made good investments in 2022 and beyond. One of those picks was BILI stock, the Chinese video sharing site that’s become known in some circles as the YouTube of China.   

There is no question BILI is not for everyone. According to the company, it had an operating loss in 2021 of $1.o billion, double what it was in 2020, from $3.0 billion in revenue. 

However, for those who have ice in their veins, the recent uptick suggests the stock might have bottomed after falling 77% over the past year.

Investors didn’t seem to like its fourth-quarter results. However, except for the significant losses, the business continues to grow sales at a reasonable pace from where I sit. Further, most of the 39 analysts who cover the stock rate it a Buy. 

Since hitting its 52-week low of $14.93 on March 14, BILI is up more than 70%.

BILI Bilibili $27.62

The Board Thinks BILI Stock Is a Buy

As part of the company’s Q4 2021 results, Bilibili announced that it had authorized a $500 million share repurchase program over the next 24 months to fund from its cash on the balance sheet. 

Perhaps more important is that Bilibili CEO Rui Chen has said that he intends to use $10 million of his own cash to buy company shares over the next 24 months in the open market. 

When it comes to company insiders, there are many reasons why they sell but only one reason they buy: they think the shares are undervalued. It’s not often that a CEO will buy $10 million on the open market. 

For example, in 2022, there have been five buys of more than $1 million by CEOs. The largest was Reed Hastings, who bought $18.3 million of Netflix (NASDAQ:NFLX) on Jan. 27. For all of 2021, there were 10 purchases of more than $1 million. The highest was a $45.5 million purchase in July 2021 by Sun Communities (NYSE:SUI) CEO Gary Shiffman.   

So, the Bilibili CEO’s commitment to buy $10 million over 24 months is a big thumbs up on the company’s future potential.   

Bilibili’s Future Growth Looks Impressive

The company’s fourth-quarter conference call focused on a few positives. For example, it increased its monthly active users (MAUs) by 35% year-over-year to 272 million. In just three years, it’s doubled its MAUs, a growth rate considerably higher than many of its internet industry peers.

The company’s goal is to hit 400 million MAUs by 2023. If it does that, it will have paved the pathway to profitability with gold. It continues to grow revenue per MAU by 20% annually.

In 2021, its revenue per MAU was 77.6 Chinese Yuan ($12.24). If this grows by 20% in each of the next two years and reaches its MAU goal, it will have annual revenue of $7.1 in 2023, up from $3 billion in 2021.

That’s not half bad.

Although most people think of Bilibili as a video-based company, it generates business from three other segments: Mobile games ($203.3 million in Q4 2021), Advertising ($249.1 million) and e-commerce ($157.4 million). 

Its value-added services (VAS) segment, which includes video, was $297.3 million in the fourth quarter, representing 33% of its overall revenue. Advertising, its second-largest revenue generator, grew by 145% in 2021 to $709.8 million. Except for mobile games, its revenue growth is off-the-charts good.

Despite the big loss in 2021, it finished the year with $4.76 billion in cash on its balance sheet. So it’s got plenty to lean on until it starts making money. 

Buy Under $20

At this point, even though I like Bilibili’s future growth potential because it loses a lot of money, this ratchets up the risk factor slightly. 

The markets right now don’t seem very cooperative. Therefore, it’s not unreasonable to think that its shares could return to the teens in the next few months. The markets have just closed out the worst quarter in 24 months as I write this.  

The analysts who cover BILI stock give it a median target price of 290.34 Chinese Yuan ($45.79). That’s good for serious potential upside over the next year.

I wouldn’t buy if you’re not prepared for above-average volatility throughout 2022. It’s unavoidable. If you don’t mind a little risk with your investments, I see Bilibili surprising a lot of investors over the next few months. 

It’s a comer.  

On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia.


Article printed from InvestorPlace Media, https://investorplace.com/2022/04/bili-stock-is-much-too-expensive-at-these-levels/.

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