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Why Bilibili Stock Plunged Today

By Evan Niu, CFA - Aug 27, 2020 at 12:13PM

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The Chinese social media company reported second-quarter results.

What happened

Shares of Bilibili (BILI 3.87%) have plunged today, down by 8% as of 11:10 a.m. EDT, after the company reported second-quarter earnings. Investors were disappointed even though the results beat expectations.

So what

Revenue in the second quarter increased 70% to 2.62 billion yuan ($370.5 million), ahead of the 2.55 billion yuan that analysts were modeling for. That resulted in an adjusted net loss of 475.7 million yuan ($67.3 million), or 1.35 yuan ($0.19) per share. The consensus estimate had called for an adjusted net loss of 1.5 yuan per share. The Chinese social media tech company said average monthly paying users more than doubled to 12.9 million.

Woman sitting at a small table with some small potted plants, a takeout beverage, and a notebook on it, while smiling at her smartphone in her hands

Image source: Getty Images.

"During the second quarter, we launched several successful marketing campaigns to raise brand awareness and improve brand perception, while actively expanding our content offerings, all of which led to our fast and healthy user growth," CEO Rui Chen said in a statement. "In the meantime, video-lization has become an inevitable trend as more people look to video as their primary way to consume and express content."

Now what

CFO Sam Fan added that Bilibili has been able to convert more users into paying users and that operating leverage helped drive margin expansion. The company recently completed a convertible note offering that raised $800 million. In terms of guidance, Bilibili is forecasting third-quarter revenue of 3.05 billion yuan to 3.1 billion yuan ($442.7 million to $449.9 million).

Following the results, Nomura Securities downgraded its rating on the stock from buy to neutral and increased its price target from $39 to $50. Morgan Stanley reiterated an overweight rating and boosted its valuation estimate from $46 to $53 per share.

Evan Niu, CFA has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Bilibili. The Motley Fool has a disclosure policy.

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