Bilibili (BILI) Is Making Some Bills For Investors, Stock Sharply Higher Following Q3 Results
2:47 pm Tuesday, November 29th, 2022
Bilibili (BILI) is surging today after the Chinese operator of an online video and gaming social media platform reported a narrower than expected loss for Q3 with revenue at the high side of prior guidance (RMB 5.79 bln vs RMB 5.6-5.8 bln guidance). The Q4 revenue outlook of RMB 6.0-6.2 bln was a bit below analyst expectations, but BILI tends to be conservative on guidance.
The operating metrics also look good with DAUs up 25% yr/yr to 90.3 mln, MAUs also up 25% to 332.6 mln and average monthly paying users (MPUs) up 19% to 28.5 mln. The growth rates slowed a bit from Q2 (+29%, +33%, +32%) but investors do not seem too concerned.
We think investors are pleased with the overall results in light of the COVID lockdowns being a headwind for BILI. While mobility restrictions may drive some user engagement, BILI gets impacted because advertisers tend to pull back on placing ads. It also likely makes it more difficult to convert consumers to paying customers.
Even with the good revenue metrics, BILI still plans to reduce expenses, including efforts to accelerate its monetization and rationalizing headcount. It also plans to cut sales and marketing expenses with the goal of improving margins and narrowing losses and it made some progress in Q3. For example, sales and marketing expense as a percentage of revenue declined to 21% in Q3 from 24% in Q2.
Overall, it is clear that investors were bracing for difficult results in light of the COVID lockdowns in China. However, BILI performed better than expected. In particular, the yr/yr improvement in advertising revenue growth in Q3 as compared to Q2 stood out to us as a metric that looked quite good and eased our fears. There was also a lot of negativity priced in as the stock has been under pressure since BILI reported disappointing Q2 results in early September. We think investors were bracing for another rough quarter, but it was better than expected.
