What happened
Shares of Bilibili (BILI -1.96%), a Chinese mobile gaming and video streaming company, were trading down by about 9% as of 1 p.m. ET Friday.
You can thank Goldman Sachs for that.
So what
On Thursday evening, well after the close of trading, the investment bank downgraded Bilibili to neutral and slashed its price target on the stock by more than half to just $43 per share.
TheFly.com reports that Goldman Sachs has several concerns about Bilibili, among them its "monetization pace, profitability, and cash flow outlook," all viewed in the context of a Chinese economy that looks "softer," and a regulatory environment that is much harder to do business in as China's government wages regulatory war against its own tech companies.
Image source: Getty Images.
Now what
Goldman is right to be concerned. Even if the Chinese economy wasn't slowing and Beijing wasn't putting heavy new regulatory burdens on tech companies, Bilibili has never been profitable. And its bottom-line numbers are getting worse. In Q3 2021 alone, Bilibili lost nearly as much money ($415 million) as it lost in all of 2020 ($461 million) -- despite revenues growing by 50% or more.
While Goldman Sachs says it's still impressed with the company's growing user engagement and sees promise in its expansion into "multi-category, multi-scenario video," the institution's analyst is clearly concerned about the lack of profits.
In that regard, it's worth pointing out: According to data from S&P Global Market Intelligence, no analysts who follow Bilibili currently see any prospect of the company turning profitable any time in the foreseeable future. For investors, it may be time to throw in the towel on this one.
