Update: The story has been updated with information related to Citi's rating action.
Bilibili (NASDAQ:BILI) shares rose approximately 7% premarket on Monday after JPMorgan upgraded shares to Neutral from Underweight with a price target of $11, up from $10.
The company had downgraded the rating The Chinese company's stock will be underweight in July 2023, but it now sees the risk/reward as more balanced.
Analysts said Bilibili's double-digit revenue growth target for 2024 is in line with consensus (+14% year-over-year) and therefore believe cuts to consensus forecasts will be limited.
“In 2024, we expect our revenue growth to accelerate and reach a double-digit growth rate, with advertising revenue growing at even faster rates. We expect our gross profit to also maintain high growth in 2024 as we further improve our gross profit margin. attributed to higher contribution from the high-margin advertising business,” Bilibili Chief Financial Officer Xin Fan said during the company's fourth-quarter earnings call.
However, analysts believe that truly achieving double-digit revenue growth in 2024 will require strong performance from new gaming portfolios and resilient growth from live streaming.
Analysts believe Bilibili faces competition from Douyin in the game streaming market, following Douyin's recent cooperation with Tencent (OTCPK:TCEHY) (OTCPK:TCTZF) on major games.
Bilibili will enter a new game release cycle starting in the second quarter of 2024 with major games three kingdoms and The sky burns redwhich should drive the reacceleration of gaming revenues, according to analysts.
Meanwhile, Citi Research degraded Bilibili (BILI) shares were upgraded to Neutral/High Risk from Buy and lowered the price target to $12.5 from $18.
Following largely online fourth-quarter results, Citi believes revenue drivers could still come from ads and value-added services, or VAS, in 2024, and the gaming business still faces uncertainty with three titles in the pipeline, said a team of analysts. directed by Brian Gong.
Analysts also cut their 2024/25 revenue estimates by 2%/4% to reflect a weaker outlook on gaming and other businesses.
While analysts applauded Bilibili's decent progress toward breaking even and efforts to boost ad growth, they noted that decent livestreaming momentum is unlikely to excite investors amid its low valuation due to the regulatory environment as the gaming business lacks growth drivers.
Gong added that with a 10% compound annual revenue growth rate, or CAGR, over 2023-26 and a slowdown in Bilibili's user growth, Citi has decided to downgrade the stock.
Bilibili (BILI) has a Hold rating in Looking Alpha's Quant Rating system, which consistently outperforms the market. The average rating of Seeking Alpha authors is also Hold, but the average rating of Wall Street analysts is more positive with a Buy rating.
