🎈 Up Big Today: Find today's biggest gainers (some over 50%!) with our free screenerTry Stock Screener

Macquarie upgrades China internet stocks, citing stronger fundamentals and growth

Published 07-10-2024, 05:26 pm
© Reuters
JD
-
BABA
-
PDD
-
3690
-
9988
-
DIDIY
-

Investing.com -- Macquarie has upgraded several Chinese internet stocks, citing improved earnings visibility and ongoing policy support from the Chinese government. 

Macquarie analysts in a note dated Monday flag upside potential for the sector, which has been trading at half the valuation levels seen in early 2023, despite stronger fundamentals. 

As per the brokerage, key players in e-commerce, travel, and local services sectors are positioned to benefit from both economic stimulus and operational efficiencies.

The note mentions that even though revenue across the sector has been affected by broader macroeconomic challenges, larger platforms have shown resilience through operating leverage and cost optimization. 

This has translated into an upward trend in earnings. Macquarie's analysts have increased their valuations for several stocks, aligning them with the outlook for fiscal year 2025, where they anticipate further government action to spur economic growth, particularly in consumption and digital services.

Among the top picks in the sector, Macquarie has upgraded Alibaba (HK:9988) and PDD (NASDAQ:PDD) to "outperform" from "neutral," while JD (NASDAQ:JD).com (HK:9618), Meituan (HK:3690), and DiDi Global (OTC:DIDIY) remain favored. 

These companies are expected to benefit from stabilizing competition in the e-commerce space and continued dominance in local services. Meituan and DiDi, in particular, are seen as "quality at a discount," with solid market positions and earnings potential.

Additionally, the brokerage flagged the potential for overseas expansion to serve as a long-term growth driver, with companies like Tencent, Pinduoduo , and Trip.com Group Ltd (HK:9961) well-positioned to capitalize on international opportunities. 

The note also mentions that investors should place greater value on the sector's global prospects, even as short-term volatility related to geopolitical tensions, including the U.S. elections and trade policy, may create buying opportunities.

Conversely, Macquarie remains cautious on online healthcare and logistics sectors, with Alibaba Health and JD Health downgraded due to concerns about competitive pressures and profitability.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.