Playing games online is more popular than ever, but not every company trying to keep you entertained is playing by the same rules. GameStop (GME -12.19%) and Bilibili (BILI -1.04%) are all about monetizing the gaming experience, but they're passing ships.
Video game retailer GameStop is closing down stores as sales decline on shifting consumer preferences. Chinese online gaming specialist Bilibili is posting explosive and accelerating top-line growth. The one thing that GameStop and Bilibili share is that both stocks have trounced the market over the past year. Let's see which of the two is a better buy right now.
Waiting for the end boss
You may not know a lot about Bilibili, and that ignorance would be a disservice to your portfolio. The stock is nearly a six-bagger over the past year, up 476% in that time. GameStop's counter? The small-box staple of the strip mall is nearly a 16-bagger over the past year, up 1,475%.
You probably know the GameStop concept well or have been hearing a lot about it in recent weeks, so let's cut to Bilibili. The China-based hub for fans of anime, comics, and gaming is attracting a growing and youthful audience in the world's most populous nation. At the time of its 2018 IPO, more than 80% of its users were considered Gen Z, between the ages of 9 and 28.
Revenue was strong before, rising 64% in 2019. Bilibili was able to pick up the pace as 2020 played out. Its top line climbed 71% through the first nine months of 2020, and that includes a 74% gain in its most recent report. We'll learn how things went in the fourth quarter in two weeks.
There were 53.3 million daily active users at Bilibili by the end of September, a 42% year-over-year advance. Revenue is growing faster because it's getting better at monetizing its young traffic. Most users are on Bilibili for free, but the number of monthly paying accounts has popped 89% over the past year to reach 15 million.
GameStop is going the other way. It recently wrapped up what will be its second consecutive fiscal year of at least a 22% decline in revenue. It's generating sales that are a little more than half of what they were when the concept peaked eight years ago. As Bilibili ascends in popularity, GameStop has 11% fewer stores than it had a year earlier. When GameStop was rallying in late January, it was more about taking advantage of a heavy base of short-sellers and flaws in the dynamics of the derivatives market to send a message to the market. It was never about the fundamentals of the underlying investment itself, beyond a nostalgic tinge.
Bilibili is not cheap by any yardstick. It's still another year away from profitability, and it fetches more than 30 times trailing revenue. But it's still the safer investment when pitted against a stock that has risen nearly 16-fold over the past year despite a business model that continues to deteriorate.
Bilibili will be vulnerable to market corrections, but at least we know that its platform continues to grow at a market-thumping pace. Despite the near-term trading theatrics, it's hard to see GameStop regaining its relevance in the future. These are two video game stocks accelerating in different directions. Bilibili is the better buy.