Benefiting from the "Relentless Pursuit of Eyeballs": Analysts Identify Promising Chinese Internet Stocks
According to analysts at asset management firm AllianceBernstein, several stocks in the Chinese internet sector are poised to benefit from the ongoing pursuit of capturing users' attention. In a note dated September 15, analysts Robin Zhu, Ronald Ma, and Xuan Ji highlighted the increasing trend of e-commerce merchants expanding their reach beyond traditional channels and onto media platforms that were previously less associated with online retail. They noted the significant growth in the gross merchandising value (GMV) of WeChat's mini program, which has surpassed a trillion renminbi ($137.06 billion). Livestreaming e-commerce in China has also seen substantial growth, reaching annualized figures in the "tens of billions of RMB," with platforms like Bilibili and Xiaohongshu reaping the benefits.
Shifting Market Share Dynamics
AllianceBernstein observed a shift in e-commerce market share away from industry giants Alibaba and JD.com, towards emerging players such as Pinduoduo (PDD), Douyin, and Kuaishou. Comparing Q2 2021 data, their estimates indicated that PDD gained a 40.4% incremental GMV share over a two-year period, surpassing Douyin's 36.1%. In contrast, Alibaba experienced a slight decline of -0.1%, while JD.com saw a 9.1% increase and Kuaishou achieved a 14.5% gain. Pinduoduo, an online retailer offering a diverse range of products, including clothing and groceries, has maintained its lead in mind share for value despite the efforts of Alibaba and JD.com to pivot towards lower prices.
Stock Ratings and Upside Potential
AllianceBernstein has assigned outperform ratings to both PDD and JD.com, with target prices of $120 and $55, respectively, representing potential upside of 20.2% and 76.7% from their closing prices on September 18. The asset manager also holds outperform ratings for other prominent Chinese internet companies, including Tencent, Meituan, and NetEase, with target prices of 455 Hong Kong Dollars ($58.20), HK$195, and $120, respectively, indicating potential upside of 45.8%, 62.5%, and 18.3%. In contrast, Alibaba, Kuaishou, and Bilibili received market perform ratings, suggesting a neutral outlook. Alibaba's price target is set at $100, representing a 14.9% upside, while Kuaishou and Bilibili have target prices of HK$70 and $16, reflecting potential upside of 10.9% and 17.0%, respectively.
Expanding Channels and Debating Upside Potential
The analysts believe that the expansion of channels for e-commerce spending could drive accelerated growth in market penetration. However, they also acknowledge that the extent of the upside potential is subject to debate. They highlight the presence of a mature ecosystem of third-party logistics providers that has reduced the competitive edge previously held by large platform incumbents in terms of facilitating shipments.
In conclusion, analysts at AllianceBernstein have identified promising Chinese internet stocks that stand to benefit from the relentless pursuit of capturing users' attention. As e-commerce continues to evolve and expand across various platforms, these stocks offer potential upside for investors, although the extent of the upside remains a topic of debate.
Hot Take: The Impact of the "Relentless Pursuit of Eyeballs" on New Business Formation in the Chinese Internet Sector
As a business journalist, the recent analysis from AllianceBernstein on the Chinese internet sector provides an intriguing perspective on the potential impact on new business formation. The firm's analysts highlighted the trend of e-commerce merchants expanding their reach onto media platforms, suggesting a shift in the digital landscape.
The Emerging E-commerce Landscape
The significant growth in the gross merchandising value (GMV) of WeChat's mini program and the rise of livestreaming e-commerce in China indicate a shift in consumer behavior. This could provide new businesses with insights into effective strategies for capturing users' attention and expanding their reach.
Shifting Market Shares: An Opportunity for New Businesses
The observed shift in e-commerce market share away from industry giants Alibaba and JD.com towards emerging players such as Pinduoduo, Douyin, and Kuaishou could signal a changing competitive landscape. This could present opportunities for new businesses to capture a share of the market.
Stock Ratings and Upside Potential: Indicators of Market Trends
AllianceBernstein's outperform ratings for PDD, JD.com, Tencent, Meituan, and NetEase, and their respective target prices, provide valuable insights into the potential upside of these companies. These ratings could serve as indicators of market trends for new businesses.
Debate on Upside Potential: A Consideration for New Businesses
While the expansion of channels for e-commerce spending could drive accelerated growth in market penetration, the extent of the upside potential is subject to debate. New businesses should consider this as they strategize their growth plans.
In essence, the relentless pursuit of capturing users' attention in the Chinese internet sector could have far-reaching implications for new business formation. The evolving e-commerce landscape, shifting market shares, and debate on upside potential provide new businesses with valuable insights into the opportunities and challenges in this rapidly evolving sector.
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