What happened
Shares of Bilibili (BILI 10.97%) were moving higher today even though there was no news out on the Chinese digital entertainment company. Instead, the stock seemed to surge on a "risk-on" day in the market, as treasury yields fell and investors piled back into tech stocks after a sell-off over the last few weeks.
As of 11:52 a.m. EST, Bilibili stock was up 10.2%, while the Nasdaq had jumped 3.4%. Chinese stocks were also surging, with the iShares MSCI China ETF up 3.8%.
Image source: Getty Images.
So what
Bilibili has tracked alongside other popular growth stocks in recent months as shares nearly quadrupled from November to February before pulling back sharply in recent weeks.
Like other mobile gaming stocks, Bilibili has seen strong growth during the pandemic. In its fourth-quarter earnings report, which came out in February, revenue jumped 91% to $588.5 million, and average monthly paying users more than doubled to 17.9 million.
Growth stocks like Bilibili have been highly sensitive to bond yields in recent weeks as rising interest rates and inflation expectations have lifted discount rates on growth stocks, bringing their valuations down. Even after the pullback, Bilibili trades at a price-to-sales ratio around 20 and the company is unprofitable, meaning shares are still expensive.
Now what
The benchmark 10-year Treasury yield is still near historic lows, around 1.5%, and is likely to move higher over the long term. But taking that into perspective, it's better to judge Bilibili on its fundamentals. Given the strong momentum the company is carrying into 2021, the long-term opportunity looks promising, though investors should keep one eye on the bottom line to make sure the company is taking steps to profitability.
