J.P. Morgan is bullish on Bilibili: a profit-growth compounding opportunity at 0.5x PEG
AI summary card
J.P. Morgan is bullish on Bilibili: a profit-growth compounding opportunity at 0.5x PEG
The report believes BILI's recent pullback creates an accumulation opportunity; AI investment, ad momentum, and a 2027 recovery in game revenue will support accelerated profit growth.
- Current valuation is 17x/12x 2026/27E P/E; versus a roughly 34% profit CAGR for 2027-28E, the report views 0.5x PEG as attractive.
- 2026 AI investment is expected to have a profit impact of less than Rmb500mn, aimed at improving video recommendations and ad technology; over the next 1-2 years it could translate into higher user time spent and ad revenue.
- 2026 game revenue is forecast to be cut by 6%, but 2027 is raised by 4%, mainly due to deferred revenue recognition for Sanmou, a gradual ramp for Ncard, and the launch of new games in 4Q26.
- The report expects operating profit growth of 23%/48% in 2026/27, and ad revenue to grow 27% in 2026, driven by rising user time spent, CPM, and ad load.
Report interpretation
Overview
This is a J.P. Morgan company research report on Bilibili. The core view is that BILI's stock performance outlook is positive. The recent underperformance is mainly attributed to the broad decline in the China internet sector, the lack of direct cloud/AI token revenue exposure, and market concerns about potential selling by a major shareholder; the report believes these concerns are overstated, and fundamental improvement plus profit growth remain the long-term support for the stock.
Core views
The report recommends accumulating BILI. Supporting factors include: AI investment is expected to improve the efficiency of video recommendations and advertising technology; the advertising business is driven by rising user time spent, higher CPM, and higher ad load; although game revenue recognition is more back-end loaded in 2026, the launch of key games in 4Q26 and contributions from new titles in 2027 should support a revenue rebound; valuation is attractive relative to profit growth.
Analysis framework
The report uses earnings forecast revisions, segment revenue timing, valuation multiples, and risk scenarios as its main analytical framework. J.P. Morgan cut 2026E revenue by 1%, mainly reflecting deferred game revenue recognition; 2027E revenue is basically unchanged, and 2026/27E EPS remains unchanged. The target price is based on 24x 2027E P/E, at a premium to Chinese digital entertainment peers, because BILI has faster profit growth potential.
Methodology notes
The target price is based on 24x 2027E P/E and compared with a 0.5x PEG corresponding to a roughly 34% profit CAGR for 2027-28E.
The report measures valuation attractiveness using P/E and PEG: the current 17x/12x 2026/27E P/E is low relative to future profit compound growth, so the stock is viewed as having accumulation value.
2026E game revenue is cut by 6%, 2027E game revenue is raised by 4%, and 2026/27E EPS remains unchanged.
The forecast revisions reflect delayed game revenue recognition, while advertising and cost optimization offset part of the pressure.
AI investment is used for video recommendations and advertising technology, with an expected 2026 profit impact of less than Rmb500mn.
The report believes AI investment can partially substitute for customer acquisition costs and optimize existing spending, with the potential to bring higher user time spent and ad revenue over the next 1-2 years.
Asset mapping & comparison
Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).
- BILI.USPrimary coverage name, U.S.-listed ADR
- Strengths
- Target price of US$35, Overweight rating; supported by profit growth, ad momentum, and a rebound in game revenue.
- Weaknesses
- Recently affected by the pullback in the China internet sector, lack of direct cloud/AI token revenue exposure, and concerns about potential selling by a major shareholder.
- Comparison
- The target price is based on 24x 2027E P/E, which carries a premium to Chinese digital entertainment peers because profit growth potential is faster.
- Risks
- Weaker-than-expected new game performance, weaker-than-expected advertiser demand, and short-term volatility caused by major shareholder selling.
- 09626.HKThe same company's Hong Kong-listed share
- Strengths
- Target price of HK$270, Overweight rating; shares the same fundamental improvement logic as BILI US.
- Weaknesses
- Also exposed to China internet sector risk and volatility in advertising and gaming businesses.
- Comparison
- The Hong Kong target price is also based on 24x 2027E P/E and a roughly 34% 2027-28E profit CAGR.
- Risks
- Revenue from new games and ad demand falling short of expectations could affect target-price realization.
Key data
- Current BILI US priceUS$17.23Price date is 2026-05-22.
- BILI US target priceUS$35.00Dec-26 target price, based on 24x 2027E P/E.
- 09626 HK current priceHK$138.10Price date is 2026-05-22.
- 09626 HK target priceHK$270.00Dec-26 target price, based on 24x 2027E P/E.
- 2026/27E operating profit growth23% / 48%The 2027 acceleration is mainly driven by a rebound in game revenue.
- 2027-28E profit CAGR34%Used to support the valuation premium and the 0.5x PEG view.
- 2026E ad revenue growth27%Driven by rising user time spent, higher CPM, and higher ad load.
- 1Q26 user time spent growth+19%The report cites this as one of the ad growth drivers.
- 2026E game revenue revision-6%Mainly due to Sanmou revenue recognition being pushed into 2H26 and Ncard's gradual ramp.
- 2027E game revenue revision+4%Supported by the launch of key games in 4Q26 and contributions from new games in 2027.
Impact & implications
If the report's view is realized, BILI's investment thesis will shift from short-term sector sentiment and shareholder-selling concerns to profit compounding, improved advertising monetization efficiency, and a recovery in the new-game cycle. On valuation, the current P/E and PEG are seen as underestimating the profit growth potential for 2027-28; on operations, AI investment may temporarily pressure some profits but could improve long-term ad efficiency and user stickiness.
Risks
- Game performance weaker than expected, especially if revenue contributions from Sanmou, Ncard, Wang Dao Tian Xia, Lumi Master, and other products launching in 2026-27 fall short of expectations.
- Advertising demand weaker than expected, causing Bilibili ad inventory monetization, CPM, or ad load improvement to miss expectations.
- Potential selling by major shareholders may create short-term share-price volatility, although the report believes it does not change the long-term fundamentals.
- Overall China internet sector valuation or sentiment may weaken, especially when the market prefers direct cloud/AI token revenue exposure, which could continue to pressure the stock.
What to watch
- Whether AI recommendation and ad technology investment can continue to lift user time spent, ad efficiency, and ad revenue.
- Whether 2026 ad revenue can approach the report's expected 27% growth.
- Whether Sanmou revenue recognition is delayed to 2H26 as expected, and the ramp pace after Ncard's expected launch in July 2026.
- The performance of Wang Dao Tian Xia and Lumi Master after their 4Q26 launches, and whether game revenue rebounds in 2027.
- Whether potential selling by major shareholders actually occurs and its impact on short-term liquidity and market sentiment.
- Whether 2026/27E adjusted net profit continues to exceed market consensus; the report says its estimates are 3%/15% above consensus, respectively.