China’s growing e-commerce market is creating a new set of winners | Wilnesh News
Online shopping in China is widely expected to grow. It’s unclear how much long-term players like Alibaba and JD.com will benefit. “There are relatively powerful insurgents coming in,” James Young, a partner at Bain & Company in Hong Kong, told me last week. “It won’t just be a two-player game, it will be a three-, four-, five-player game,” he explain. Bain data shows that e-commerce’s share of China’s retail sales will rise from 27.9% in 2019 to 37.5% in 2023. Data shows that in Asia, the country ranks first in e-commerce penetration by far. In the United States, official data shows that e-commerce penetration is still slightly below the peak of 16.4% of retail sales during the epidemic. In an effort to bolster confidence in Alibaba, the e-commerce giant’s co-founder Joe Tsai told CNBC’s Emily Tan earlier this year that online shopping will account for 40% of retail sales in China within the next five years, describing it as an opportunity The company is ready to take on the challenge after restructuring last year. Yang agreed with Tsai’s prediction of rising e-commerce penetration. “I’ve talked to a lot of people in the industry and at some point the guess was 50-50 because ultimately physical stores are going to come into play,” he said. “Who is going to enjoy this growth?” Yang said. “The growth formula and incremental growth are different from before.” PDD Holdings, Temu’s parent company, recently surpassed Alibaba in market value again. Goldman Sachs analysts upgraded Pinduoduo’s rating from neutral to buy on May 24, just two months after downgrading the rating in March. Goldman Sachs analysts Ronald Keung and David Ma said in the report: “We believe that China’s e-commerce is becoming one of the undervalued sub-sectors in China’s Internet (relative to high single-digit industry GMV growth).” GMV (gross merchandise) Value) measures total sales over a period of time. Goldman Sachs analysts pointed to ad tech upgrades that could boost ad revenue, strong free cash flow generation and global expansion that has yet to be priced in. They raised Temu’s valuation from $18 billion to $19 billion, based on a model that excludes the company’s U.S. operations. Analysts also raised their price target for Pinduoduo from $145 to $184 per share, which is about 21% higher than the stock’s closing price on Thursday. According to the 618 Shopping Festival, which is about to end in mid-June, China’s e-commerce companies will receive a recent report card in the next few weeks. Morgan Stanley equity analyst Eddy Wang and his team said: “With a higher competitive base in the second quarter of 2024 and competition entering 6.18 years, we need more evidence to prove that JD.com’s business has improved, although the company maintains Full-year guidance remains unchanged. The company has an equal-weight rating on JD.com, with a price target of $28 per share, which is lower than the stock’s closing price of $30.21, according to a May 28 report. Shares could rise to $40, with a buy rating on the stock, UBS analyst Kenneth Fong and team wrote: “On a clean basis, as JD.com optimizes its business, department store merchandise, especially the supermarket category, should become a hit. Key drivers for 2024. While JD.com has yet to make a major push into overseas e-commerce, Alibaba has increased spending on international operations. Last week, the company’s AliExpress cross-border e-commerce platform announced the signing of David Beckham as its largest global brand ambassador to date Partnership. JP Morgan China Internet analyst Yao Ming said in a report on May 15, “We expect Alibaba’s stock price to remain range-bound in the next 3-6 months as its financial situation is in the early stage of the investment cycle. Still facing uncertainty. He rates the stock an “overweight” with a price target of $100, which is nearly 26% higher than Thursday’s closing price. “Improving domestic e-commerce market share should ultimately lead to better results. Monetization,” Yao said. “Taobao/Tmall’s GMV grew by double digits year-over-year in the March quarter, indicating that its market share losses have been very modest compared with the 11.6% national online physical goods GMV growth in the quarter.” However, the real cannibalization Companies with market share are not listed companies. TikTok parent company ByteDance operates a similar version of the app in China called Douyin, which has become a sales portal for brands and influencers, primarily through live streaming. Goldman Sachs’ analysis shows that Douyin’s total GMV market share in China is expected to reach 19% this year, surpassing JD.com, Alibaba’s Taobao or Tmall. The investment firm predicts that Douyin will equal Pinduoduo’s 21% market share next year and surpass Pinduoduo to reach 22% in 2026. % GMV market share. Another growing e-commerce company is Hong Kong-listed Kuaishou. The video streaming platform reported last month that first-quarter e-commerce GMV grew 28.2% year-on-year to 288.1 billion yuan ($40.55 billion). Sophie Huang, an analyst at CMB International, said in a report on May 23: “We remain optimistic about (Kuaishou) advertising and e-commerce monetization and profit growth, and forecast total revenue to increase by 9.5% annually in the second quarter of 2024. The company expects Kuaishou’s e-commerce GMV revenue to grow by 25% this year, although live streaming revenue, which accounts for about one-third of total revenue, is expected to decline due to a high base. CMB International sets a target price of 97 for Kuaishou stock. Hong Kong dollar ($12.41), about 70% higher than Friday’s levels — CNBC’s Michael Bloom contributed to this report.
