Bilibili Shares Have Surged More Than 200% Since Its IPO. Here’s Why

Bilibili Inc (NASDAQ: BILI) is a Chinese entertainment company providing content in various media formats, including videos, live broadcasting, and mobile games. It focuses primarily on customers from generation Z – individuals born after 1990.

Since its IPO in 2018, the company’s stock price has surged more than 200%. This piqued my interest in learning more about the company.

Here are three things that I found during my research of the company that I think investors will find useful.

Astronomical growth

Founded in 2009, Bilibili has grown into a multibillion-dollar company with revenue of RMB 6.8 billion (US$956.7 million) in 2019. Revenue has jumped more than 50-fold in the last four years alone thanks to the increase in the monetisation of its users.

Despite the strong growth in revenue, Bilibili has yet to report a profit. What’s more, the operating loss has grown by more than 400% from 2014 to 2019 owing to its continued investment in acquiring new users and quality content.

Going forward, Bilibili intends to scale its platform further and also to improve its monetisation through channels like live streaming, advertising, and e-commerce. These initiatives, if successful, may help the company turn a profit.

Operational metrics

The strong performance in revenue was driven by the improvement of several important metrics such as monthly active users (MAUs), monthly paying users, as well as user retention rates.

Here are some numbers. Bilibili grew its MAUs from 77 million in the first quarter of 2018 to 172 million in the first quarter of 2020. More importantly, 7.8% of its MAU in the first quarter of 2020 spent money on Bilibili’s platform, up from 3.2% in the first quarter of 2018.

Moreover, the company has a high 12-month user retention rate of more than 80% for its official members. To become official members, users must pass a community entrance exam consisting of 100 questions covering community etiquette and various topics.

Strong performance across these operational metrics has propelled the company’s financial growth over the last few years.

Shareholder structure

Another important factor that might have contributed to Bilibili’s strong performance is its stable shareholder structure. There are two aspects to this; its owner-operator approach and the support of technology giants.

The senior management team of Bilibili own 26.7% of the company’s shares with 78.0% of voting power, making it both the owner and operator of the company.

With significant financial stakes in Bilibili, the management team’s long-term financial interest is nicely aligned with that of the minority shareholders.

Moreover, Bilibili has also financial support from two technology giants in China, namely Tencent and Alibaba, which own 13.3% and 7.2%, respectively, of the company’s stock.

Lately, Sony has also acquired a 4.98% stake in the company. With these giants as partners, Bilibili can access various resources – such as capital, quality content, and users – which will improve its long-term competitive position.

Foolish takeaway

Bilibili is a classic example of a growth stock. It has very high revenue growth thanks to the solid improvement in operational metrics.

Moreover, it has a solid investor base which will provide the necessary stability for long-term growth.

Still, investors should be aware that the entertainment company is still unprofitable; it has never reported a profit in the last five years. This is an area that investors should keep a close eye on.