What happened
Bilibili(NASDAQ: BILI) shareholders lost ground to the market this week, as the stock fell 6% through Thursday trading. That's compared to a 0.4% increase in the wider market, according to data provided by S&P Global Intelligence. The China-based social media specialist is now down roughly 33% so far in 2022, compared to a 10% rise in the S&P 500.
The latest decline came after Bilibili reported strong sales growth, paired with continued struggles on the profitability front.
So what
Revenue was flat for the Q1 period that ran through late March, the company said on Thursday. The company posted much higher advertising revenue, but this increase was offset by a decline in its casual gaming segment. Good news for the business included an 18% increase in daily active users, up to 94 million, and healthy average engagement, at 96 minutes per day.
However, investors were more concerned about profitability, which is still a challenge. Bilibili generated a $92 million loss despite aggressive cost cuts.
Now what
Executives said they were nonetheless pleased with the steps the business is taking toward profitability. Gross profit margin improved to 22% of sales from 16% of sales a year ago. And cost cuts didn't meaningfully hurt its growth momentum, so Bibili is planning to lean more heavily on these savings strategies over the next few quarters.
"Our primary focus will remain on enhancing our commercialization efficiency and improving our profitability," CEO Rui Chen said in a press release.
Investors might want to watch that rebound story from the sidelines for now, given that Bilibili still hasn't demonstrated its ability to generate sustainable profits. The stock is worth following, though, given its increasing scale in a huge potential growth market.
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Demitri Kalogeropoulos has no position in any of the stocks mentioned. The Motley Fool recommends Bilibili. The Motley Fool has a disclosure policy.
