Here's Why Goldman Sachs Downgraded Bilibili, Zhihu, Tencent Music Entertainment

Here's Why Goldman Sachs Downgraded Bilibili, Zhihu, Tencent Music Entertainment
  • Goldman Sachs downgraded three Chinese companies which trade in the U.S.
  • Goldman Sachs analyst Piyush Mubayi downgraded Bilibili Inc BILI to Neutral from Buy with a price target of $43, down from $105 (17.68% upside). 
  • The analyst is becoming more cautious on the company's monetization pace, profitability, and cash flow outlook against softer macro in China and the regulatory overhang in online game/ad verticals.
  • Mubayi remains constructive on the company's user engagement in 2022 as it expands its multi-category, multi-scenario video community.
  • Mubayi downgraded Zhihu Inc ZH to Neutral from Buy with a price target of $5.40, down from $12.80 (32.03% upside). 
  • The analyst is becoming more cautious about the company's monetization pace, profitability, and cash flow outlook against softer macro in China, the regulatory overhang in online ads verticals, and a lower growth ceiling for the company. 
  • Mubayi believes more sustainable growth and subsequent re-rating requires robust execution.
  • Mubayi downgraded Tencent Music Entertainment Group TME to Sell from Neutral with a price target of $5.70, down from $7.70 (4.68% downside). 
  • The analyst said his lowered revenue estimates factor in challenges across business lines, including consumers' reduced willingness to pay amid weak macro, sluggish user expansion against fierce competition, and slower-than-expected non-subs growth on the back of tightening regulations. 
  • Price Action: BILI shares traded lower by 3.39% at $35.30 in the premarket on the last check Friday. ZH is down by 3.42% at $3.95, and TME shares traded lower by 2.67% at $5.83.

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