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Chinese internet companies grow their users bases and their ability to monetize them, could result in rapid revenue and earnings growth.
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Growth is decelerating for Trip.com Group, with the largest online travel company in China even foreseeing the possibility of single-digit growth in the fourth quarter that would be a dubious first in its 20-year history. Revenue rose 12 percent to $1.5 billion (RMB10.5 billion) in the third quarter over the same period in 2018. This […]
YY's third-quarter 2019 results reflect strong live streaming revenues. However, higher investments in content and technology were a dampener.
These three U.S.-listed Chinese stocks have done well so far this year and stand to do better than others should the prolonged U.S.-China trade dispute finally come to an end.
(Bloomberg Opinion) -- To understand how different China’s two largest internet companies are, take a look at the revenue breakdown for Tencent Holdings Ltd. As a provider of social media, games and financial services, Shenzhen-based Tencent merely dabbles in advertising. E-commerce giant Alibaba Group Holding Ltd. is built on it. That divergence could end up being Tencent’s greatest strength as it seeks to climb out of a prolonged funk that’s seen revenue slow and profit fall.While Alibaba and other Chinese internet companies such as Baidu Inc. and startup ByteDance Inc. battle it out for a share of advertising in an increasingly competitive market, Tencent has the chance to leverage its core strengths of games and social networking. That can make it less beholden to the ad business, which was its largest area of weakness in what was a very tepid quarter for the company.Tencent posted third-quarter revenue growth of 21% late Wednesday. That’s not the worst on record, but it wasn’t great. Ads contributed 19% of revenue, down from 20.2% a year earlier. In fact, that prior figure was a record. As recently as three years ago, ads accounted for just 12.3% of the top line. Alibaba, on the other hand, gets half its sales from advertising and around 22% from commissions.Advertising was the biggest area of weakness for Tencent, climbing a relatively lackluster 13%. It was hurt by a slowdown in the auto sector while “uncertain content scheduling and lower sponsorship” brought down revenue from ads placed alongside its various streaming services such as sports and self-produced drama series.Investors can expect this to turn around, but thankfully they won’t need to rely on it because Tencent is so diversified.The Alibaba versus Tencent divide worked against the latter’s share price over the past few months because investors remained concerned about its ability to sail through regulatory and economic storms. Clouds hang over the gaming business as the Chinese government continues a campaign against addiction that’s forced companies to implement stricter controls. Alibaba, on the other hand, benefited from an anticipated Hong Kong IPO and revenue growth that was largely driven by recent acquisitions. It’s understandable that investors remained gun-shy after last year’s crackdown on games, which prevented companies from monetizing new titles. Tencent management was pragmatic enough to ease up on marketing at that time, recognizing that there wouldn’t be a lot of business to chase as long as Chinese regulators put the brakes on that sector. With online games being the company’s largest division, at a third of revenue, even reduced expenditure couldn’t prevent the fiscal pain.The social-networks unit, at around 23% of sales, was also affected since it includes mobile games and other offerings such as video subscriptions and sports broadcasts. While controversy over the NBA forced Tencent to halt some basketball broadcasts last month, a bigger risk to Tencent Video is increasing censorship that will encroach on self-developed productions. Management hinted at such troubles by referencing “the unexpected delay of certain top-tier drama series” in its August investor conference, which it pointed to again in this earnings statement.And yet, Tencent’s management team has become experts in navigating Beijing’s political whims. It implemented the “Healthy Gameplay System” two years ago to combat addiction, which gave it the confidence to claim late Wednesday that “recent regulations that limit younger players’ game play will have limited additional impact to our business.”Tencent also returned from the games freeze with a new patriotic title called Homeland Dream, which topped the charts within days of its debut at the end of September. That helped push smartphone games revenue 25% higher in the third quarter. Expect the company to show similar pragmatic patriotism when it develops new drama series. I’d go so far as predicting that Tencent will say it wants to broadcast more Chinese sports leagues. Hint: President Xi Jinping is known to be a soccer fan.Harder to skirt, however, is an economic slowdown in China that’s impacting the advertising sector. This is worsened by increasing competition from upstarts like ByteDance’s Douyin short-video service (its international version is called TikTok).While many cheered Alibaba’s 40% increase in September-quarter sales, they missed the fact that China customer-management revenue (the company’s code phrase for ads) climbed just 25%. The remaining growth came chiefly from new businesses such as groceries and offline retail. By contrast, Tencent was able to lean not only on smartphone games, but also its fintech and business-services unit, where revenue rose 36%. I argued earlier this week that the company should spin off its fintech division, and these results bolster that thesis.It’s hard to argue that Tencent’s latest earnings are stellar. But at least its has a unique story to tell, one that doesn’t rely on it competing with a giant.To contact the author of this story: Tim Culpan at firstname.lastname@example.orgTo contact the editor responsible for this story: Patrick McDowell at email@example.com, Beth WilliamsThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Tim Culpan is a Bloomberg Opinion columnist covering technology. He previously covered technology for Bloomberg News.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
TechTarget (TTGT) is at a 52-week high, but can investors hope for more gains in the future? We take a look at the company's fundamentals for clues.
Tencent Music's (TME) third-quarter 2019 results benefit from expanded paid mobile subscriber base and increase in the number of users willing to pay for premium music service.
Applied Materials' (AMAT) technology leadership position and strong product line in Display and Services are likely to reflect on fiscal fourth-quarter results.
How to invest and find the greatest stock market winners? Don't search for penny stocks that trade just a few thousand shares a day. Seek those with high daily volume.
(Bloomberg) -- Just a year ago, Tencent Holdings Ltd. locked up one of the most coveted media franchises in the country when it paid $1.5 billion for five years of exclusive streaming rights to National Basketball Association games. A single tweet changed all that.Now, the Chinese social media giant may have to suspend airing those matchups -- which drew half a billion viewers last year -- after Houston Rockets General Manager Daryl Morey triggered a media blackout in China by tweeting support for Hong Kong’s pro-democracy protests. That sums up a disappointing 2019 for a company that looked like it was back on track after a horrendous 2018.At stake now for Tencent are billions of dollars in ad and subscription revenue, along with its strategy of becoming a go-to online destination for entertainment beyond gaming. Tencent was supposed to hit the comeback trail this year after a nine-month freeze on game approvals gutted its most profitable business in 2018. But a sharp Chinese economic slowdown, competition from up-and-comer ByteDance Inc. for internet traffic and advertising, and now tricky political considerations is snarling that recovery. That’s a key reason its stock has vastly under-performed arch rival Alibaba Group Holding Ltd. this year, creating a gap of more than $90 billion in their market valuation.“One of China’s biggest companies, who does everything right politically, stands to lose billions due to the political issues outside of its control,” Mark Tanner, founder and managing director of Shanghai-based consultancy China Skinny. “We’ve seen how the company has toed the line with the gaming rules recently and I expect they will be even more careful with this one.”Read more: Tencent-Against-Alibaba Bet Could Have Made 29% This YearPolitical issues aside, Tencent’s 2019 has not gone as well as investors anticipated. The company is projected to report barely any growth in net income when it announces September-quarter results Wednesday, because revenue growth is barely keeping up with the pace of spending on ever-costlier content and servers for its cloud and media services.Read more: Tencent Gets ‘Wakeup Call’ From China’s Assertions of PatriotismBut things are improving in its core gaming business, which still yields the majority of Tencent’s revenue. Widely ridiculed at the outset because of built-in party propaganda slogans -- the military advised on the project -- and family friendly gore-free rubric, 2019’s Peacekeeper Elite evolved into a breakout hit approaching the scale of longstanding cash cow Honour of Kings. Tencent’s shares climbed 2.2% Tuesday after Sensor Tower data showed the company’s gaming revenue gained 13% during the week of Oct. 28, led by Peacekeeper Elite.Yet uncertainty shrouds the division as well. Earlier this month, state media reported that the nation’s publications regulator will cap online game playing time at 1.5 hours per day for children, a big demographic for Tencent’s mobile games.What Bloomberg Intelligence Says“Tencent may deliver accelerating growth for its mobile games business, but its online advertising segment could stay tepid. 3Q mobile games’ sales growth could be the strongest in six quarters, based on Sensor Tower estimates. This is likely to be driven by the resilience of Honour of Kings, explosive growth of Peacekeeper Elite, and the low comparison base from 3Q18 stemming from China’s freeze on game approvals in March 2018.”\- Vey-Sern Ling, analystClick here for the research.The WeChat operator has lost $86 billion of market value since its April peak, and in October tested a key support level -- which would have precipitated a sharp and longer-term downtrend. At the time, trading floors were abuzz with talk about generally souring sentiment from investors in China, as well as concern that Tencent’s decision to resume live-streaming NBA games may backfire.Longer term, the worry is that Tencent may be losing its golden touch.ByteDance came out of nowhere in 2017 to humiliate the social media titan, betting presciently on the short-video craze that birthed its Douyin and TikTok apps and forcing Tencent to mimic its much smaller rival. ByteDance is now flooding the market with ad inventory, depressing prices for incumbents such as Tencent and Baidu Inc.That’s important because Tencent looks at advertising as a potential growth catalyst, given its lower ad load relative to its rivals -- and ByteDance has shown that the Chinese company can’t predict every trend or potential rival.The NBA brouhaha “places further pressure on Tencent’s advertising revenue. More broadly, Tencent’s advertising business faces structural declines in video advertising revenue and increased competition from ByteDance,” said Michael Norris, research and strategy manager at Shanghai-based consultancy AgencyChina.Read more: TikTok Owner ByteDance Aims to Build Global Reach Before IPO(Updates with weekly gaming and shares in the seventh paragraph)To contact the reporter on this story: Lulu Yilun Chen in Hong Kong at firstname.lastname@example.orgTo contact the editors responsible for this story: Peter Elstrom at email@example.com, Edwin Chan, Colum MurphyFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg) -- Alibaba Group Holding Ltd. logged more than 268 billion yuan ($38.3 billion) of purchases during its Singles’ Day bonanza, exceeding last year’s record haul after a 24-hour shopping marathon.An estimated half-billion shoppers from China to Russia and Argentina swarmed the e-commerce giant’s sites to scoop up everything from Apple Inc. and Xiaomi Corp. gadgets to Ugandan mangoes. The company again hosted a televised entertainment revue in Shanghai to run alongside the bargain-hunting, this time enlisting Taylor Swift and Asian pop icon G.E.M. to pump up sales.The world’s largest shopping event has become an annual ritual for Asia’s largest company, part showcase of commercialism and part publicity blitz. Also referred to as “Double 11” because it falls on Nov. 11, it’s closely watched by investors keen to gauge how willing Chinese consumers are to spend as economic growth threatens to slip below 6%.Tensions between Washington and Beijing continue to fuel uncertainty and roil global commerce. Among China’s largest corporations, Alibaba is expected to better ride out the storm, thanks to booming online consumption in the world’s No. 2 economy. On Sunday, Alvin Liu, a Tmall general manager, said Alibaba doesn’t expect any impact on its cross-border import business from an ongoing trade spat.“Alibaba will probably be the one that will be able to circumvent and come out from the trade war in better shape” versus Baidu Inc. and Tencent Holdings Ltd., Richard Wong, head of ICT for the Asia Pacific at Frost & Sullivan, told Bloomberg Television. “The current sentiment and confidence in terms of spending is still relatively high.”While Alibaba and its rivals routinely trumpet record sums in the event’s aftermath, it’s unclear how much Nov. 11 sales actually will contribute to the bottom line given the enormous discounting involved. A good result however could bolster Alibaba’s effort to raise as much as $15 billion in a landmark Hong Kong share sale this month, according to people familiar with the matter.Singles’ Day emerged as a uniquely Chinese antidote to the sentimentality surrounding Valentine’s Day. Emerging on college campuses across the country, it takes its name from the way the date is written numerically as 11/11, which resembles “bare branches,” a local expression for the unattached.It’s now become an excuse for people to splurge. Last year, sales at Alibaba climbed 27% to 213.5 billion yuan, equivalent to $30.7 billion at the time. This time, purchases grew 26% from the year earlier. More merchandise is sold online over the 24-hour period than during the five-day U.S. holiday buying spree that begins on Thanksgiving and ends on Cyber Monday.Alibaba’s U.S. traded shares were down 1.9% Monday to $183.70 at 11:25 a.m. in New York.Alibaba saw 100 million new users join the shopping festival this year, according to Jiang Fan, president of the company’s e-commerce marketplaces Taobao and Tmall.“This is the power of expanding into less developed regions,” he said. “We hope this event can help more factories and farmers.”Read more: Alibaba Said to Seek Up to $15 Billion in Hong Kong ListingIt’s Time for Alibaba to Slay Jack Ma’s Monster: Tim CulpanBut the company faced stiff competition this year from smaller platforms including JD.com Inc. and Pinduoduo Inc. -- the aggressively expanding upstart that’s encroaching on the market leaders’ turf. They vied for the wallets of Chinese shoppers particularly in relatively untapped rural areas. All employ heavy discounting and hard-sell tactics in the run-up to and during the 24 hours in a bid to best the previous year’s record.“Overall, we think this year will likely see a more competitive Double 11 period,” Ella Ji, an analyst at China Renaissance Holdings Ltd., said in a report. “We anticipate each platform will spend more on subsidies.”Daniel Zhang, who took over as Alibaba chairman from billionaire Jack Ma in September, pioneered the show in its present form in 2015. The Singles’ Day impresario passes the baton this year to Fan, a potential successor to Zhang himself.“Over the years, we’ve seen consumers become more diverse and younger. Each generation of consumers needs their own peers to serve them,” Zhang said in a post on Alibaba’s blog. “I think this young team is the future.”The 2019 edition came with slight twists to the formula. Alibaba, stung by criticism it harmed the environment by shipping an estimated 1 billion packages in a single day -- has enjoined its logistics arm Cainiao to set up recycling centers at 75,000 locations. It says it will also work with courier companies to pick up used boxes and wrapping.An expansion into Southeast Asia and less-developed areas in China plus newer services -- such as transactions on food delivery site Ele.me, grocery store chain Hema and travel service Fliggy -- bolstered the total. The company also brought in livestreamers including Kim Kardashian to appeal to younger buyers.Other aspects remained the same. Singles’ Day has always been an opportunity for Alibaba to test the limits of its cloud computing, delivery and payments systems. Leaving little to chance, Alibaba sent teams across the nation ahead of Nov. 11 to help myriad outlets prepare for the festival. Some 200,000 brands had been expected to participate in 2019‘s edition of the festival.“Singles’ Day is becoming popular outside of China, especially in the ASEAN region,” said Patrick Winter, Ernst & Young Asia Pacific managing partner. “You’re also seeing how it’s growing in smaller cities in China.”(Updates with new user number in tenth paragraph.)To contact the reporter on this story: Lulu Yilun Chen in Hong Kong at firstname.lastname@example.orgTo contact the editors responsible for this story: Peter Elstrom at email@example.com, Molly Schuetz, Edwin ChanFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
Investors seeking to tap Singles' Day benefits in a diversified way should focus on the following four ETFs that provide substantial exposure to the Chinese e-commerce segment.