UBS slightly lowers Bilibili's target price to $36, rating "Buy"

UBS's research report indicates that Bilibili-W (09626.HK) had overall solid performance in the third quarter, with user growth and advertising growth exceeding expectations, which is seen as high-quality growth; although investors reacted negatively to the fourth quarter gaming outlook, it is believed that this issue stems from the timing of the season calculation cutoff for "Three Kingdoms: Strategy of the World," and is essentially temporary.

Given Bilibili's high-quality user growth and advertising growth, UBS maintains a constructive view on the company. Although the fourth quarter gaming business outlook is weak, it is more a matter of revenue timing. UBS believes that from a price-to-earnings ratio perspective, Bilibili's valuation is starting to appear attractive, with the current price equivalent to an estimated 2026 price-to-earnings ratio of 25 times, and an adjusted annual compound growth rate of earnings per share of 35% from 2025 to 2027.

UBS views recent game releases (such as "Dudu Face Prank" in 2025 and "Three Kingdoms: General Card" in the first quarter of next year) as catalysts, with an attractive risk-reward profile; if the current momentum in advertising growth can continue into 2026, it is expected to exceed market expectations.

Due to a downward adjustment in gross margin assumptions (partially offset by lower taxes), UBS's target price for Bilibili's U.S. stock (BILI.US) has been slightly lowered from $37 to $36 based on a discounted cash flow method, implying estimated price-to-earnings ratios of 45 times, 34 times, and 25 times for 2025 to 2027, respectively; the target price for the Hong Kong stock is HKD 279.9