Bilibili: HSBC sees better outlook and valuation, upgrades to buy

Investing.com -- HSBC upgraded Bilibili (NASDAQ:BILI) to Buy from Hold in a note on Wednesday, citing a stronger outlook in gaming, advertising, and profitability, along with an undemanding valuation. 

The bank also raised its price target to $22.50 from $21.50, implying roughly 25% upside.

“We are encouraged to see Sanmou Season 7 (S7) beat our / Street expectations,” HSBC (LON:HSBA) analysts wrote, adding that they are “more constructive on soon to launch S8,” which is expected to debut in late May with significant updates.

HSBC lifted its game revenue forecasts by 6 to 8% for 2025-2027 and increased overall topline projections by 2%, also citing “better-than-expected VAS driven by quality user growth.” 

First-quarter results exceeded expectations, with non-GAAP net profit 25% above HSBC estimates and 40% above consensus. This was attributed to “lower-than-expected R&D and G&A expense.”

HSBC now expects a 20% revenue increase in the second quarter, driven by 61% year-over-year growth in games, 19% in advertising, and 10% in value-added services. 

“More resilient performance in high-margin game and ad businesses can support stronger earnings prospects,” the analysts wrote.

In advertising, growth was underpinned by improved ad load, higher eCPM, and growing user traffic. HSBC expects “ad tech improvement is expected to further enhance user targeting and conversion.”

Bilibili is also building out its AI capabilities by fine-tuning open-source models and plans to launch a text-to-video tool for content creators by the end of 2025.

At 22x 2025 earnings and with 48% non-GAAP EPS growth forecast for 2026, HSBC believes Bilibili’s valuation is compelling.