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Barclays Capital upgraded Bilibili (NASDAQ:BILI) to Equal-weight from Underweight citing solid first-quarter results and a third-quarter breakeven, which is now in sight for the Chinese online entertainment services provider.
The firm also raised the price target on the stock to $14 from $10.
Analysts led by Jiong Shao noted that first quarter revenues came in slightly better than expected and were up 11.7% year-over-year, driven by strong advertising +31% year-over-year, and Value-added services, or VAS, +17% year-over-year, while mobile games were down 13%year-over-year.
Operationally, the company achieved record Average daily active users, or DAUs, 102 million and daily time spend 105 minutes. Gross margin was 28.3%, +650 bps year-over-year.
Bilibili is guiding gross margin to continue to improve quarter-over-quarter in coming quarters and reaffirming its target of adjusted operating income breakeven by the third-quarter. The analysts highlighted that a key concern of investors around the company has always been its lack of profits. Now with solid progress made in its march toward breakeven over the past few quarters and with breakeven in sight with a high confidence level, they have upgrade shares to Equal-weight.
Jiong Shao and his team added that they like the strong growth in high-margin advertising business and the segment growth looks highly likely to continue as Bilibili improves monetization of its content driven traffic. They also liked meaningful improvement in gross margins along with good opex control, thus cutting losses significantly.
The analysts noted that they will continue to monitor continued margin expansion and cost control over the next couple of quarters, and traction of new game, post launch on June 13.
Bilibili (BILI) has a Hold rating at Seeking Alpha’s Quant Rating system, which consistently beats the market. The Seeking Alpha authors’ (total 1 author here) average rating is Sell, the average Wall Street analysts’ rating is more positive with a Buy.