Revenue growth is decelerating at Bilibili (BILI 2.38%), but shareholders who have seen their investment shrink in recent months don't have to look hard for the silver linings. Bilibili stock initially moved lower on Tuesday night after posting mixed third-quarter results, but the stock is moving higher on Wednesday after the market realizes that it may have gone too far in punishing the Chinese online hub for fans of anime, comics, and games.
Wednesday's bounce may or may not last, but it comes as a welcome break to the stock's slide since peaking shortly after its springtime IPO. Bilibili stock is inching higher for the fourth month in a row, but it still closed 40% below its June high on Tuesday.
Image source: Bilibili.
An animated response
Revenue rose 48% to hit $157.1 million, surpassing Bilibili's own guidance as well as the $146.7 million that analysts were modeling for the period. The adjusted net loss widened during the quarter to $29.7 million or $0.10 a share, a bit more red ink than what the Wall Street pros were expecting.
Mobile gaming revenue growth slowed to 24% for the quarter, which is problematic since it continues to account for the lion's share of Bilibili's business -- clocking in at 69% of the quarter's revenue mix. Bilibili's other major revenue-generating line items naturally grew faster, as advertising, live broadcasting, and value-added services cranked out triple-digit-percentage growth during the third quarter.
A lot has happened since Bilibili hit the market at $11.50 in March, nearly doubling by the time it peaked three months later. The Central Cyberspace Administration of the People's Republic of China temporarily blocked app distribution as it investigated the short-form video content of online platforms. Regulators remain stingy on gaming app approvals.
Bilibili continues to find a way to thrive in this climate, tightening its grasp on its growing audience. Average monthly active users have risen by 25% to 92.7 million over the past year, also up nicely sequentially from the 85 million active users it had during the second quarter. Big gains are coming in turning its ad-viewing freeloaders into paying accounts. Average monthly paying users have more than tripled over the past year to 3.5 million, also a healthy uptick from the 3 million it had on its rolls three months earlier.
Getting folks to pay is no easy feat, and not just because it's China. Bilibili's audience is young -- really young -- and paying often isn't in the cards. A whopping 82% of its user base was 18 or younger at the time of its IPO. They lean on the hub heavily, as the average active user was spending 76 minutes on the site according to its springtime prospectus. Keeping its audience engaged and growing revenue at a faster clip than its active users should help extend Bilibili's monthly winning streak, but we still have a long way to go before the stock claws its way back to fresh all-time highs.
