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Why Bilibili Stock Was Slipping Today

By Jeremy Bowman – Aug 19, 2021 at 9:20AM

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Shares of the Chinese tech stock fell in spite of a better-than-expected earnings report.

What happened

Shares of Bilibili (BILI 6.28%) were pulling back today after the Chinese digital media specialist posted second-quarter earnings this morning. Though the results topped estimates, they still weren't enough to overcome the stiff headwinds against Chinese stocks, as investors anticipate the Chinese government will impose stricter regulations on the sector.

As of 2:08 p.m. EDT, Bilibili stock was down 6.3%.

Person standing still and looking at their smartphone while surrounded by blurry images of other people crossing the street.

Image source: Getty Images.

So what

Revenue at Bilibili jumped 72% in the quarter to $696.2 million, which beat analysts' expectations for $663.7 million in sales. Average monthly active users increased 38% to 237.1 million, and daily active users were up 24% to 62.7 million, showing its entertainment platform continues to see solid growth. 

Further down the income statement, gross profit rose 64% to $153.2 million, but its operating loss expanded to $235.5 million due to a sharp increase in sales and marketing spending. On an adjusted basis, the company reported a per-share loss of $0.35 compared to $0.21 a year ago, though that result was better than estimates of a per-share loss of $0.45.

CEO Rui Chen said, "Our robust second quarter performance shows that our high-quality user growth strategy is working. In the second quarter, our total MAUs reached 237.1 million, representing year-on-year growth of 38%. At the same time, our users remain sticky and engaged, with the average user time spent on Bilibili rising to an impressive 81 minutes per user per day, the most we have seen in the second quarter throughout our operating history."

Now what

For the current quarter, Bilibili expects revenue of $785 million-$800 million, which was in line with estimates and would represent 60% growth from the year-ago period at the midpoint.

While there's nothing in the report that would have prompted sell-off, a number of Chinese stocks were falling today on fears of a continued crackdown by the Chinese government. Given that Bilibili trades at a high multiple and is still losing money, investors seem to think the possibility of further regulation outweighs a solid earnings report.

Jeremy Bowman owns shares of Alibaba Group Holding Ltd. The Motley Fool owns shares of and recommends Alibaba Group Holding Ltd. and Bilibili. The Motley Fool has a disclosure policy.

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