Alpha Alert: China Big Tech Earnings. Tencent, Alibaba &
M+ Global Updates 14/05/2024 12:27

Index heavyweights Tencent Holdings Ltd. and Alibaba Group Holding Ltd. both publish results tomorrow, followed by Inc. ( $, Inc. Sponsored ADR Class A JD$ $JD-SW 09618.HK$ ) & Baidu ( $Baidu, Inc. Sponsored ADR Class A BIDU$ $BIDU-SW 09888.HK$ ) two days later. Those four firms alone represent more than a quarter of the MSCI China gauge.

According to the average analyst estimate compiled by Bloomberg, Tencent ( $TENCENT 00700.HK$ ) is expected to see a 6% increase in revenue for the quarter ending in March, while Alibaba's sales are predicted to rise by 5.6%.

However, the initial earnings data have not been entirely positive. Chinese companies have reported a significant miss in first-quarter results so far, although there has been a sequential improvement compared to the previous three months. The internet giants, Tencent and Alibaba have been buying back their shares at a record pace and Tencent's share price has been rallying over the past two month

A decade after its highly successful initial public offering, Alibaba ( $BABA-SW 09988.HK$ $Alibaba Group Holding Ltd. Sponsored ADR BABA$ ) is facing challenges in regaining its momentum. The Chinese e-commerce giant's shares, listed in New York and Hong Kong, have seen minimal growth of less than 5% this year, significantly trailing competitors such as archrival Tencent ( $TENCENT 00700.HK$ ), which have experienced double-digit gains during the same period. Tencent's 12-month average TP is at 421.78 HKD.

Alibaba is focusing on artificial intelligence and cloud services to drive growth. Additionally, it is increasing investments domestically, including an $800 million contribution to AI startup Moonshot as part of a $1 billion funding round in February, as reported by the Financial Times.

Shares of Alibaba are currently trading at less than 10 times the projected earnings for the next 12 months, according to LSEG, which is less than half of their 10-year average. Wu still needs to further persuade investors of the company's prospects. Alibaba 12 monthly Bloomberg TP is at 98.20 HKD

While's share ( $, Inc. Sponsored ADR Class A JD$ $JD-SW 09618.HK$ ) price has surged approximately 55% in the last three months, its earnings and fundamentals have shown weakness over the past three years and stocks have lost significant value since 2021. Over the three-year period of declining share prices, experienced a 22% annual decrease in earnings per share (EPS), closely aligning with the 23% annual decline in share price. This indicates that market sentiment towards the company has remained relatively unchanged despite the disappointing performance. It appears that the share price decline mirrors the downward trend in earnings per share.

However, the company has announced a $3b buyback plan after a revenue beat in March 2024, since then stock prices have risen close to 55% after the buyback announcement. 12 monthly average TP stood at 139.82 HKD

β€”β€”β€” Trading ideas from Loui, M+ Online Head of Research

More about Loui:

Loui Low leads a team of analysts to perform equity and economic research and to provide investment advisory services to the organization's sales team, fund manager and retail fraternity. He has more than 10 years of experience in the stockbroking industry.

He graduated with a Bachelor of Science in Statistics from University of Malaya. He also holds an STA Diploma and is a member of the Society of Technical Analysts (MSTA) United Kingdom.

For more Insights from Loui, please check out his Trade Radar & Alpha Alert's exclusive Topic Page ←with this link 😎....


The content is provided as general information only and should not be taken as investment advice. All the contents shall not be taken as a recommendation to buy or sell any security or financial instruments. Any action you take resulting from information, analysis, or commentary on this article is your responsibility. Please consult your investment advisor before making any investments.

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