Online gaming bucks the trend of weak consumption
Communications
Blue Lotus’s research suggests game and online video revenues are holding up better than movie theatres and that Tencent, NetEase and Bilibili’s 2Q24 NI will comfortably beat consensus forecasts. Over the past seven years, they have found an inverse relationship between online game and video with offline movie receipts. Gross billings of China’s gaming industry grew by 2.1% Y/Y in 1H24, reversing a decline since 2022. Online video grew by 1.4%. While smaller developers continue to struggle (economies of scale / large companies benefitting from AI investments and acquisitions), Blue Lotus raises their target prices for NetEase and Bilibili. Tencent remains their top pick.
Edition: 192
- 09 August, 2024
Communications
The company’s trajectory, marked by a blend of user engagement, content diversity and strategic foresight, remains significantly undervalued by the broader market. Bilibili's ability to maintain user growth with minimal marketing investment underscores a strong user stickiness and a sustainable and thriving content ecosystem, that has untapped potential for commercialisation through increased ad revenue. The strategic recalibration in its gaming sector, coupled with nuanced advertising strategies, signals robust growth prospects for 2024, reinforcing Horizon Insights’ bullish stance on the stock. Furthermore, the embrace of AI technology not only aims to enhance user experiences but also to unlock new commercialisation frontiers.
Edition: 183
- 05 April, 2024
Communications
What started out as a promising year for BILI is decidedly less so as we move through 4Q23. Gaming has been stymied following the botched launch of Pretty Derby, its marquee title for 2023, and the recovery in advertising is not strong enough to offset the missing revenue. There is no question that trimming opex and COGS is important for the path to profitability, but a rebound driven by cost-cutting does not generate the same giddy excitement among investors that one gets from new products, new customers and reinvigorating the top line. There is a path to success, but it is narrow and RedTech remains sceptical.
Edition: 172
- 27 October, 2023
iQIYI (IQ US), Bilibili (9626 HK), Kuaishou (1024 HK)
Based on Westlake’s proprietary analysis and survey of 19 large agencies and advertisers, IQ has outperformed its peers in recent quarters with strong content and can meet 4Q street revenue expectations. Bilibili can at least deliver in-line 4Q revenue growth propelled by solid VAS and better-than-expected ad and game biz. Kuaishou can deliver 4Q ad revenue in-line with street expectation propelled by solid streaming eCommerce growth and growing advertisers; and saw robust ad spending from gaming in Jan. They are positive on all three names, given recent sharp ad spending rebound from several verticals and further consumer / ad spending recovery in 2023.
Edition: 154
- 17 February, 2023
Technology
No-Man’s Land - BILI delivered strong growth in users and revenue in 2021 but margins collapsed as the result of its growth-at-all-costs strategy. With the stock down ~75% from its peak, one might assume that most of the bad news is already baked in, but RedTech are concerned that BILI may face more headwinds. While margins should improve as the company focuses on higher-quality revenue sources, RedTech worries that growth was inflated by KOL’s recycling livestreaming revenue, which could lead to slower growth in the future. Separately, BILI faces more risk than many peers from competition and heavy-handed regulation.
Edition: 129
- 18 February, 2022
Keep on top of the latest Asian Gaming trends
Niko Partners track streaming and viewing on China’s largest game platforms, DouYu, Huya and Bilibili. They provide analysis on daily, weekly and monthly market trends and game rankings based on key metrics such as streaming hours, streamers, heat index, fans and virtual gifting (tips). In addition to these regular updates, Niko’s also provide Country Reports (latest market developments, models, 5-yr forecasts...) which offer a deep dive into several of Asia’s key games markets including the three fastest growing - India, Indonesia and Thailand.
Edition: 110
- 14 May, 2021
Bilibili (BILI US) US
Technology
‘Too Niche or not to Niche’ - BILI’s evolution from niche purveyor of ACG (Anime, Comics and Gaming) content to entertainment giant continues apace and with management’s target of 400m MAUs by 2023, the bar is high. The problem is that while trying to appeal to a wider audience BILI risks losing the very thing that made it special - a dedicated community of ACG lovers. This begs the question: would BILI be better off doubling down on its existing strengths instead?
Edition: 109
- 30 April, 2021