Shares of Bilibili (BILI, Financial) surged by 15%, hitting their highest price point of the year, following an upgrade from JP Morgan. This positive shift more than offset a downgrade from Citigroup, propelling the stock back to its post-Q3 earnings peak in late November. Despite a subsequent 30% decline over two months due to constant selling pressure, the outlook for BILI now appears significantly brighter.
Bilibili's journey towards profitability has shown promising signs, especially after the heavy selling pressure. The company has made substantial progress in reducing losses and improving gross margins, signaling a potential upside if it meets its financial goals for the year.
- BILI reduced its Q4 loss to RMB 1.34 per share, a significant improvement from the RMB 3.34 loss a year earlier. This was partly due to cost-cutting measures that boosted gross margins by 660 basis points year-over-year.
- Advertising, making up about a third of BILI's revenue, grew by 28% year-over-year in Q4, driven by a 60% increase in performance-based ads. The company plans to further enhance its advertising capabilities, including the use of generative AI for ad creation in FY24.
- The gaming segment, another key revenue source for BILI, also saw a 2% increase in Q4. With three new game titles approved for release, revenue is expected to grow in the coming quarters.
Despite facing economic challenges that have slowed its explosive growth during the pandemic, BILI is making strides towards profitability. The company's sales growth was modest at 3.4% in Q4, with a slight decrease in daily active users. However, BILI's focus on improving profitability amidst a tough economic environment in China shows promise for its financial future.
