Morgan Stanley raises Bilibili's target price to $25, fourth-quarter guidance misses market expectations

Morgan Stanley's research report indicates that although Bilibili (09626.HK)(BILI.US) exceeded earnings expectations in the third quarter, with a slight improvement in advertising business momentum and the success of the game "Escape from Duckkov," the management did not raise the fourth quarter guidance due to seasonal factors affecting "Three Kingdoms: Strategy of the World." It is initially believed that next year's performance is likely to be lower than the market's expectations according to the bank.

The company currently expects a mid-single-digit revenue increase in the fourth quarter, with game revenue remaining flat or slightly up quarter-on-quarter, and advertising revenue growing at a low 20% level. In terms of profit margins, the company guided for a fourth quarter gross margin and adjusted operating profit margin of 37% and 10%, respectively, in line with previous guidance and the bank's expectations.

The bank has raised its earnings forecast for 2025 by 14% and increased its earnings per share forecast for 2025 to 2026 by 2%; the target price for U.S. stocks has been raised from $23 to $25, maintaining a "Market Perform" rating, as the current valuation is deemed reasonable