Should you buy Bilibili stock in Q3 after solid Q2 results?

On Thursday, Bilibili Inc. (HKG:09626) shares plummeted nearly 7% after announcing its most recent quarterly results. The company reported its fiscal Q2 revenue and earnings before markets opened, beating expectations. It also provided Q3 revenue guidance in line with expectations.

Bilibili posted Q2 non-GAAP earnings per share of $-0.35, beating analyst expectations by $0.10. Its GAAP EPS of $-0.45 also outperformed the consensus Street estimate of $0.55, while revenue grew by 72% from the same quarter a year ago to $696.2 million, beating the average estimate by $32.92 million.

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The Chinese video game publisher also reported a significant growth in its user base, with monthly active users (MAUs) surpassing 237 million, up 38% from Q2, 2020. On the other hand, mobile MAUS increased 44% to 220.5 million.

Is Bilibili stock a buy in August 2021?

Although Bilibili shares are down more than 32% this year, the stock still trades at a steep P/S ratio of 13.54, making it less attractive to value investors. Furthermore, analysts expect the company’s earnings per share to decline by more than 118% this year before rising 32.90% next year.

Therefore, growth investors may also opt for alternatives in a highly competitive video gaming market. 

The company provided Q3 revenue guidance in the range of RMB 5.1 ($790 million) to RMB 5.2 billion ($800 million), in line with Street forecasts. Therefore, with analysts not expecting a surprise in Bilibili’s Q3 results, there are not enough catalysts to trigger a significant bull run.

Technical overview: Bilibili stock price predictions for Q3 2021

Technically, Bilibili shares seem to be trading within a descending channel formation in the intraday chart. The stock has recently plunged to oversold conditions if the 14-day RSI. However, the downward movement still seems poised to continue amid a lack of catalyst to trigger a significant rebound.

Therefore, investors can target extended declines at approximately $51.40 or lower at $40.16. On the other hand, the resistance levels are $73.43 and $84.21.

Bottom line: Why sell Bilibili stock now?

In summary, although Bilibili shares are down more than 32% this year, the stock is still up more than 40% over the last 12 months. 

Therefore, it is yet to retest its current 12-month lows, leaving more room for downward movement. As a result, it may not be too late to sell Bilibili shares.

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