Bilibili Stock Has a Lot to Prove on Monday

It's been a bumpy rookie season of ups and downs for Bilibili (NASDAQ: BILI) investors, and the next big test comes early next week when the Chinese online hub for fans of anime, comics, and games reports fresh financial results. Bilibili has been one of the market's more volatile stocks since going public at $11.50 in March.

Bilibili didn't draw a lot of interest out of the gate, opening at $9.80 on its first day of trading. However, a blowout first quarter in late May attracted plenty of market attention. The stock would peak in mid-June at $22.70, more than doubling off of its first public trade just three months earlier. But feast has turned into famine this summer. Shares of Chinese internet gaming stocks have taken a beating as regulators clamp down on new content, something that has weighed on some of the larger companies but has been brutal for the younger and smaller Bilibili.

The big zinger for Bilibili came in late July when its app was taken down from some smartphone app stores in China in response to the crackdown on content sharing. The stock has been cut roughly in half since its June high, and it's now back below its March IPO price.

Drawn that way

There isn't a lot of analyst coverage for Bilibili at this point, but Wall Street pros see another period of strong growth. Analysts are targeting $146.9 million in revenue for the quarter, a healthy sequential increase off the $138.4 million it rang up during the first quarter and once again more than doubling off of prior-year levels. It wasn't until the second half of last year that revenue spiked into the nine figures, something that will make growth comparisons more challenging at this point.

Analysts are also bracing for another modest deficit. Bilibili isn't profitable at this juncture, and this isn't typically a deal breaker for growth investors at this phase of a company's cycle.

Looking back won't be what will move Bilibili stock when it reports after Monday's market close. Investors will want to know how Bilibili is holding up this summer given the regulatory roadblocks.

There's no denying that Bilibili was on a roll earlier this year. It attracted an average of 77.5 million active monthly users through the first quarter of the year. Bilibili may have gotten its start by attracting young Chinese users to its anime portal, and 82% of its audience is under 18 according to its IPO prospectus. However, mobile games are now accounting for 79% of its revenue. Bilibili teens often go online with empty pockets, as most of the content is free and ad supported, but the number of people paying for premium features has nearly tripled over the past year.

Bilibili should have a strong second quarter, but that's not why the stock has been cut in half since mid-June. Investors will want to know how the current quarter and beyond are playing out given China's challenging climate for online content platforms, and that's where Bilibili will have to prove convincing if it wants its stock price to match its audience's age -- in the teens.

10 stocks we like better than Bilibili Inc.When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has quadrupled the market.*

David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and Bilibili Inc. wasn't one of them! That's right -- they think these 10 stocks are even better buys.

Click here to learn about these picks!

*Stock Advisor returns as of August 6, 2018

Rick Munarriz owns shares of Bilibili Inc. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.