Admittedly, Bilibili (NASDAQ:BILI) is an unusual name, but this Chinese digital entertainment company could turn out to be a great investment. If you’re not familiar with BILI stock, then consider putting this one on your radar.
I covered this company a while ago, and I made a bullish call on BILI stock, while conceding that it’s definitely a niche investment.
If you’re not located in China or you’re above the age of 30, there’s a fair chance that you’ve never used Bilibili’s services. And normally, I would hesitate to recommend owning a stake in a company that’s completely unfamiliar to you.
The remedy for this would be to learn as much as you can about the company and the stock, and then decide whether it’s a good investment. We’ll do that right now, starting with an analysis of the recent price moves in BILI stock.
A Closer Look at BILI Stock
Momentum-focused investors will probably like this stock as it’s moved very far, very fast during the past year.
Twelve months ago, the stock cost less than $25 per share. Yet, by the end of 2020, it had climbed all the way up to $85.
Amazingly, that wasn’t the end of the bull run. BILI stock topped out at $157.66, a 52-week high, on Feb. 10. So, we can see why “momo” (momentum) traders would like this stock.
Unfortunately, it appears that stockholders were destined to cough up some of those gains. By March 12, the share price had retraced to $109.99. Currently, BILI stock is hovering around $114.88.
If you’re planning to buy and hold BILI stock for a long time, then the recent share-price pullback might just be a bump in the road. The more important consideration is whether the company is experiencing user and revenue growth.
Multiple Revenue Sources
Let’s back up a little bit. First and foremost, we need to understand Bilibili’s business model.
As InvestorPlace contributor Joel Baglole explains, “The company runs an online platform focused on anime, comic books and video games.” Moreover, “Bilibili claims to be focused squarely on a youth audience, primarily Generation Z.”
Now, the skeptics might object if they feel that young Bilibili users won’t actually pay. However, this isn’t necessarily true, as some will pay for certain perks and features.
For instance, they might pay for a premium-level, ad-free membership. Or, they could pay for “virtual gifts,” or for specific content within the video games.
In 2020, Bilibili generated its revenues from multiple segments:
- 40% from mobile gaming
- 32% from value-added services (virtual gifts, subscriptions for Bilibili’s media platforms, etc.)
- 15% from ad revenue
- 13% from other sources, including Bilibili’s e-commerce marketplace
As you can see, the company is actually fairly diversified in its revenue sources. But that leads us to the question of whether Bilibili is showing growth in its revenue generation.
The answer to that question is a resounding “yes.” In fact, each and every one of the aforementioned business segments has posted robust gains.
On a year-over-year basis, Bilibili’s mobile gaming segment showed a 34% revenue increase in fiscal year 2020. And the other segments did even better within that time frame:
- Advertising: 126%
- Value-added services: 134%
- E-commerce and other revenue sources: 109%
Thus, Bilibili isn’t entirely dependent on its mobile gaming segment.
Still, the popularity of newer games like Princess Connect, along with more established games like Azure Lane and Fate/Grand Order, certainly isn’t hurting the overall fiscal picture.
It’s also worth mentioning that at the end of Bilibili’s fourth fiscal quarter, the company had 202 million monthly active users. That’s a whopping 55% increase compared to the year-ago period.
BILI Stock: The Bottom Line
Bilibili is still a niche company, as its services appeal to a specific swath of the population.
On the other hand, the company’s revenue sources are surprisingly diversified. It’s evident that Generation Z is willing to pay to use Bilibili’s services, and that’s great news for long-term BILI shareholders.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article.
David Moadel has provided compelling content – and crossed the occasional line – on behalf of Crush the Street, Market Realist, TalkMarkets, Finom Group, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.