On Monday, Citi adjusted its stance on Bilibili Inc . (NASDAQ:BILI), downgrading the stock from Buy to Neutral and reducing the price target to $12.50 from the previous $18.00. The revision follows Bilibili's fourth-quarter results for 2023, which aligned closely with expectations.
The management of Bilibili anticipates an upturn in top-line growth for 2024, projecting double-digit growth and a positive non-GAAP Operating Profit (OP) by the third quarter of 2024. This optimism is based on a strategic shift towards higher-margin advertisements and stringent cost control measures.
Despite Bilibili's management expectations for growth driven by advertisements and Value-Added Services (VAS), Citi has expressed concerns regarding the gaming segment of the business, which currently has three titles in development. The uncertainty surrounding the gaming business has led to a downward revision of revenue estimates for 2024 and 2025, with a 2% and 4% decrease respectively. This more conservative outlook is reflected in the lowered price target.
Citi acknowledges Bilibili's strides towards reaching a profit breakeven point and its endeavors to bolster advertisement revenue growth. However, the firm notes that the enthusiasm for the company's live streaming momentum may be tempered by investor concerns over the regulatory environment and a lack of growth catalysts within the gaming sector.
The firm's assessment points to a Compound Annual Growth Rate (CAGR) of approximately 10% in revenue from 2023 to 2026. Nonetheless, the slowdown in user growth is a factor contributing to the downgrade to a Neutral rating with a High Risk designation.
Bilibili's future performance in the market remains to be seen as it navigates these challenges and attempts to capitalize on its revenue growth strategies.
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