In January 2020, Bilibili Inc. spiked up to touch all time highs of $21.4. After Q3 2019, investors are pushing the company’s valuation up as the sales growth was favourable.
While we do agree with the positivism of the market, in our view, the shares are too expensive. The market is not expecting more than 49% sales growth in 2020. With this in mind, we don’t understand how Bilibili is touching a total valuation of more than 6.5x sales. We are seeing a total valuation of more than $6 billion for Bilibili, which has not yet reported sales of even $1 billion.
In our opinion, once investors understand that sales growth cannot continue at the current level, we would expect the share price to decline. We cannot exactly predict where will the share price go. However, we believe that the total valuation could easily go to $3-$4 billion. Keep in mind that other Chinese stocks trading in New York are trading at less than 3x-4x sales.
With these figures, we would be expecting the share price to go to $10-$15 once the market reviews carefully the expected sales figures.
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Disclosure: We hold no position in Bilibili Inc. either long or short, and we have not been compensated for the research.
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