What are the prospects of these three established giants in 2020?
Editor’s note: This article from the public micro-channel number “iFeng Technology” (ID: ifeng_tech) , the author of Phoenix Network Technology Channel.
In 2019, the fate of Chinese technology giants Baidu, Alibaba Group and Tencent Holdings (BAT) will be different. They all face a series of domestic problems and also have to deal with the test of the external environment. The company’s trends are also different.
What are the prospects of these three established giants in 2020? Well-known financial website CNBC has sorted out the trend of BAT this year. On the whole, BAT has to face the challenges of Internet upstarts such as Meituan Comments, Byte Beat Company, and Pinduoduo.
Baidu keywords: Fierce competition
As China’s largest search engine, Baidu has about 70% of the search market share, and generates revenue through advertising, much like Google. However, in 2019, Baidu encountered some strong resistance in the domestic market, causing the stock price to fall by about 20% last year.
The growth of China’s advertising market has slowed down in 2019, and the regulatory authorities’ scrutiny of online advertising has become stricter. This puts pressure on the entire advertising market and also impacts Baidu’s performance, which is highly dependent on advertising revenue.
Baidu also faces fierce competition in China. The Douyin parent company Byte Beat launched a search product last year. Chinese users are becoming more accustomed to using so-called “super apps” such as Tencent WeChat. These super applications can provide users with a one-stop service, from electronic payment, booking air tickets, to watching videos, which is critical for companies to lock users into their ecosystem and improve product stickiness.
However, Baidu has launched a counterattack. Baidu has launched an autonomous mobile service called Baidu App, which integrates search and information. Baidu App has achieved strong user growth, which is a promising business for a company with a slow transition to mobile.
At the same time, Baidu also decidedRealize diversification of revenue. Content has become a key component of Baidu’s iQiyi revenue. In the third quarter of this year, iQiyi’s revenue was 7.4 billion yuan (about 1.04 billion US dollars), an increase of 7% year-on-year, and subscribers increased 31% year-on-year. Despite a difficult year, Baidu’s third-quarter results were better than expected, and the stock price has achieved some rebounds in the past few months.
Li Yanhong, CEO of Baidu
But analysts point out that Baidu faces some resistance in 2020. “In the long run, given that large mobile applications are all closed systems, it is difficult to index their content, so we believe that Baidu is still challenging to build a mobile ecosystem,” Huaxing Capital analysts said in a November report last year. “Considering that the competitive environment is likely to remain fierce in 2020, we remain conservative on Baidu’s progress in advancing mobile traffic and mobile revenue.”
But in the longer term, Baidu may find some comfort in updating the technology. Baidu has been betting on future technologies, including self-driving cars, and has been promoting its cloud business and smart speakers in China. Some analysts believe that these are expected to be Baidu’s long-term growth drivers. “Continuous progress in cloud computing, smart devices and autonomous driving businesses will drive Baidu’s future growth.” Investment bank Jefferies said in a November report last year.
Analysts have given Baidu an average share price of $ 148.37, which is 5% more than Baidu ’s closing price on Thursday.
Ali keywords: New retail
Ali has always been the best performing stock in BAT. In 2019, Ali seems to be on fire, and the stock price has increased by about 55%.
Investors were worried that a slowdown in China’s economic growth would curb Chinese consumer demand. However, driven by Chinese consumers’ continued enthusiasm for online shopping, Ali’s core e-commerce department (accounting for about 85% of revenue) remained resilient throughout the year. As of the second quarter of fiscal 2020 in September, Ali’s core e-commerce business revenue increased by 40% year-on-year.
Analysts believe that the cloud computing sector is critical to Ali’s future. Alibaba Cloud also continued to demonstrate its momentum, with cloud computing revenue up 64% in the second quarter.
Ali has also been pursuing its “new retail” strategy, which aims to combine online and offline businesses, such as payments, physical stores and takeaways.
In a recent research report, Jefferies stated that Ali will benefit from China’s expanding middle class and small cities’ increased use of e-commerce platforms and data. “Ali is a clear leader in pursuing digital economic strategies. With 960 million users in China’s digital economy, online retail, local services, digital entertainment, and logistics and payment services have produced powerful synergies, all of which originate from Ali Focus on user experience and product innovation that is different from peers. ” Ali also successfully re-listed in Hong Kong, and the current stock price is higher than the issue price.
However, Ali also encountered some challenges. In the field of takeaways, Ali faces competition from Meituan. In the field of e-commerce, JD.com and Pinduoduo are both Ali’s opponents.
Analysts are optimistic about the future trend of Ali’s stock price, giving him an average target stock price of $ 234.63, which has nearly 6% growth space compared with Thursday’s closing price.
Tencent keywords: Diversity
As one of the world’s largest game companies, Tencent operates WeChat, a popular chat application in China, with over 1 billion users. In 2018, Chinese regulators froze game approvals. For Tencent, which accounts for a large proportion of the company’s overall revenue, this is bad news. However, by the end of 2018, China had resumed game approval, and Tencent’s online gaming department had achieved a certain recovery. In the third quarter of last year, Tencent’s online game revenue increased 11% year-on-year.
Like Baidu, the weak advertising market has also hurt Tencent’s performance. But in the third quarter of last year, the performance of Tencent’s advertising department rebounded. Tencent has multiple advertising channels, but analysts value the circle of friends. This is a social media feature of WeChat. Tencent has been advertising in the circle of friends information. In the third quarter of last year, Tencent’s social and other advertising revenues increased by 32% year-on-year.
Tencent has been promoting diversified development, and cloud computing and fintech business are growing. Tencent operates WeChat Pay, a payment platform, through WeChat.
Similarly, Tencent faces challenges in the future. In the third quarter of last year, Tencent’s profit attributable to the company’s equity holders fell by 13% year-on-year, and its net interest rate also declined. This profit pressure will continue into 2020.
“Even though Tencent is expected to maintain profitability through cost control, we believe that profits are still under pressure.” China Investment Bank Guotai Junan Securities said in a recent report.
Other analysts pointed out that Tencent holds several key games in the game market and has a strong product lineup that should be able to support the development of its game business, although the weakness of the PC market will offset the growth of the mobile game business.
“Smartphone gaming revenue growth is expected to further strengthen in the fourth quarter of last year and 2020, mainly due to strong game lineup expectations. However, we are not optimistic about the revenue growth of PC client games and believe it willTo some extent, it has dragged down Tencent’s online game revenue growth from fiscal 2019 to fiscal 2020. “Said Guotai Junan Securities.
Average analysts have given Tencent stock a target price of HK $ 415.79, which is nearly 5% higher than Thursday’s closing price. In 2019, Tencent’s stock price rose by nearly 20%.
Ali has always been the best performing stock in BAT. In 2019, Ali seems to be on fire, and the stock price has increased by about 55%.
Investors were worried that a slowdown in China’s economic growth would curb Chinese consumer demand. However, driven by Chinese consumers’ continued enthusiasm for online shopping, Ali’s core e-commerce department (accounting for about 85% of revenue) remained resilient throughout the year. As of the second quarter of fiscal 2020 in September, Ali’s core e-commerce business revenue increased by 40% year-on-year.
Analysts believe that the cloud computing sector is critical to Ali’s future. Alibaba Cloud also continued to demonstrate its momentum, with cloud computing revenue up 64% in the second quarter.
Ali has also been pursuing its “new retail” strategy, which aims to combine online and offline businesses, such as payments, physical stores and takeaways.
In a recent research report, Jefferies stated that Ali will benefit from China’s expanding middle class and small cities’ increased use of e-commerce platforms and data. “Ali is a clear leader in pursuing digital economic strategies. With 960 million users in China’s digital economy, online retail, local services, digital entertainment, and logistics and payment services have produced powerful synergies, all of which originate from Ali Focus on user experience and product innovation that is different from peers. ” Ali also successfully re-listed in Hong Kong, and the current stock price is higher than the issue price.
However, Ali also encountered some challenges. In the field of takeaways, Ali faces competition from Meituan. In the field of e-commerce, JD.com and Pinduoduo are both Ali’s opponents.
Analysts are optimistic about the future trend of Ali’s stock price, giving him an average target stock price of $ 234.63, which has nearly 6% growth space compared with Thursday’s closing price.