Consumers enjoy themselves at the Nanjing Road Pedestrian Street, the busiest business and tourism landmark in Shanghai, China, May 5, 2023.
Chief Financial Officer | Future Publishing | Getty Images
Analysts are bullish on China’s big tech companies, even as the recovery and their latest earnings look uneven across the board.
Although the search engine giant baidu Exceed revenue and profit expectations for the first quarter of 2023, and Tencent bounced back to growth after successive negative and flat quarters, alibaba First-quarter revenue fell short of expectations, and its Hong Kong-listed shares fell nearly 5 percent on Friday.
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“Baidu, Alibaba, Tencent reported — most earnings missed expectations,” Ronald Keung, head of Asia Internet research at Goldman Sachs, said on CNBC’s “Street Signs Asia” on Friday.
Alibaba missed analysts’ revenue expectations, but revenue rose 2 percent year-on-year to 208.2 billion yuan ($29.6 billion).
The tech giant’s domestic commerce unit fell 3% in the first quarter, while its cloud business fell 2% — underscoring concerns that the rebound in consumer spending in China may not be as strong as expected.
Noting the drop in Alibaba shares, Barclays analyst Shao Jiong said on Friday ahead of the weekend’s G7 summit: “I think there are some geopolitical issues…investors are worried about potential sanctions on China and are against it. Chinese company.”
Leaders of the Group of Seven nations are in Hiroshima, Japan, over the weekend to discuss global and regional issues, including challenges posed by China’s policies and practices.
In a joint statement, the G7 leaders acknowledged the need to de-risk and diversify from China – not decouple. They emphasized the need to “address challenges posed by Chinese policies and practices” and “combat malicious acts such as illegal technology transfer or data leakage.”
But when Alibaba announced plans on Thursday’s earnings call to spin off its cloud business into a separate public company and list its logistics and grocery divisions, analysts expressed optimism.
Shawn Yang of Blue Lotus Research Institute said a report The company is “positive about the impact of separate listings and disclosures of several business units”.
Wedbush Securities analyst Dan Ives told CNBC that Alibaba’s plan to spin off its Cloud unit is “a smart strategic move that we think adds part of Baba’s sum to its valuation” and is “a step in the right direction for the Alibaba story.” step”. “
The regulatory environment for Internet companies appears to be loosening, and we see Alibaba as a major beneficiary of the Chinese agency.
Alibaba Cloud, the computing unit behind the tech company’s ChatGPT-style product Unified Qianwen, “is really the crown jewel,” said Shao, noting that AI has the power to change the way people do things, and even human beings.
“In two or three years, Alibaba Cloud’s value could easily reach around $100 billion,” Shao said.
still recovering
Baidu, Tencent and Alibaba attributed their financial results to the end of China’s aggressive zero-coronavirus policy in December – a domestic recovery after strict lockdown and quarantine measures ended.
During the company’s first-quarter earnings briefing on Thursday, Zhang Yong, chairman and CEO of Alibaba Group, said: “With the decline in Covid-19 cases after the Lunar New Year, business and social activities in China have gradually resumed. This kind of The changes have affected some of our businesses to varying degrees.”
Tencent Chairman and Chief Executive Ma Huateng said the company’s revenue returned to double-digit growth as most categories of payment volume and advertising spending benefited from a recovery in consumption in China.
Barclays’ Shao said advertising was doing very well, noting that Tencent and Baidu both reported double-digit year-on-year growth in their ad businesses.
The latest official figures show China’s economy grew a faster-than-expected 4.5% year-on-year in the three months to March.
Both Keung and Shao said e-commerce was recovering, but not as quickly as the market expected.
“I think the e-commerce data did show some recovery in one year and two years, we’re seeing some signs of a gradual recovery in that consumption,” Keung said.
“Travel has been strong and the apparel category really started to pick up in March.”
They “expect some attractive prices during the 618 shopping festival to drive demand,” Keung said. The 618 shopping festival, which takes place on June 18, is one of the most important shopping festivals in China.