What happened

Shares of Chinese online entertainment platform BiliBili Inc. (NASDAQ:BILI) tumbled on Thursday despite no meaningful company-specific news. This may be a reaction to the stock increasing in value too quickly, with shares doubling between early May and mid-June. BiliBili stock was down about 12.7% at 11:30 a.m. EDT.

So what

Shares of BiliBili rose from around $10 per share in early May to more than $20 per share a few days ago. The company's first quarterly report as a publicly traded company in late May helped fuel the rally. The company is growing extremely fast, with revenue more than doubling in the first quarter on a year-over-year basis. That rapid growth no doubt got investors excited.

A man with his head on a desk with a crashing chart in the background.

Image source: Getty Images.

But BiliBili is also unprofitable. The company posted a GAAP net loss of about $18.5 million on $138.4 million of revenue during the first quarter. Adjusted losses were much smaller, but only because of a big increase in stock-based compensation.

At the stock's peak of roughly $21 per share, the company was valued just shy of $6 billion. That put the price-to-sales ratio over 10 at the current revenue run rate, a lofty valuation.

Now what

BiliBili is not the only Chinese internet stock to rocket higher over the past couple of months. Streaming company iQiyi saw its stock double in just 30 days, an even more impressive feat given its market capitalization of nearly $30 billion.

Be very cautious if you're considering investing in any of these high-flying Chinese internet stocks. Thursday's plunge may only be the beginning of a much larger correction.