Alibaba, Baidu, and Tencent: China’s Tech Trio’s future

China is home to three Tech Giants. Alibaba, Baidu, and Tencent. These companies have had ups and downs in 2019.

Tech Giants are known as “BAT.” Usually referred to as “the trio”. Every company faced hardships after the US-China war of trade. Which formed into a War of tech. FAANG stocks in the USA faced obstructions of domestic issues too.

Let’s see BATs performance in the year 2020.

Baidu facing a strong Competition

The China’s largest search engine is Baidu. It has roughly a 70 percent share of the market. The main source of revenue is its advertising. Just like how Google does it. However, in the year 2019, there were some hardships. The headwinds caused Baidu to lose a 20 percent market share.

There was a decline in advertising. In the year 2019, the market went down. This weighed down on Baidu. Its main source of revenue got hit and lessened. Moreover, the company faces strong competition in China as well.

TikTok the social app TikTok’s owner developed a search engine. ByteDance the owner gave fierce competition to Baidu. The Chinese became more comfortable with super apps.

Super apps enable customers to do each thing. From electronic payment to watching videos and booking flights. These apps became very important for companies. As to lock the users and keep them glued to the product. Moreover, keep them into their ecosystems.

However, Baidu is not losing hope.

Company launched its own super app. The Baidu super App. This saw a strong growth of users. Now that is an encouraging sign for the company!

Although the company had a slow change towards mobile, it still got back in the game. Meanwhile, Baidu decided to expand its income stream.

Content became an important part of iQiyi. Which is a streaming video platform like Netflix. The income from iQiyi got to 7.4b yuan. This was in the quarter of September. The revenue increased by 7 percent. Whereas, the subscribers increased by 31 percent year after year.

Baidu had better results in the third quarter. Even though it had a tough year. The losses were somewhat recovered. As the shared shed some losses.

Analysts say that Baidu can face unforeseen blows in 2020.

China Renaissance has said that Baidu is still changing its mobile ecosystem. Mobile apps that are large are difficult to index. Due to the fact they are closed systems. He has further stated that competition will still be intense. And that they will keep pushing on traffic and revenue of mobile.

Baidu is now finding backups in new technologies. However, the relief will come in the long term.

Baidu is also said to be experimenting. Putting money on technologies of the future. Such as driverless cars. Moreover, it’s also bringing cloud division to China. Not only this but smart speakers are also being pushed. Some analysts say it’s a growth driver for the long term.

Jefferies in November said progress towards the future is being taken. Autonomous driving, Smart devices, and cloud are being invested in.

The average of $148.37 target of the price is set on Baidu. This represents a 5 percent increase.

The New Retail: Idea of Alibaba

Alibaba’s stock performed the best. Compared to the trio, it was at the top. The shares got up by 55 percent in 2019. As the company experimented and succeeded in all.

However, there were concerns that China’s economy will affect Alibaba. The consumer demand of China can dampen. Hence, it can pose a negative impact.

But the core division commerce stayed resilient. This division accounts for Alibaba’s 85 percent of the revenue. The core commerce revenue increased 40 percent year after year.

Analysts see the cloud division as crucial for the future. Hence, it flexed its muscles continuously. There was a rise of 64 percent in Cloud computing. In the quarter of September.

Alibaba’s new Strategy

Alibaba also pushes a new strategy. It named “new retail.” The aim is to combine offline and online elements. Such as physical stores, food delivery, and payments.

Alibaba is said to benefit from the growing middle class. Moreover with the increased use of the platform of e-comment in small cities.

Jefferies wrote that pursuit is in progress. The economy strategy digitally covers more than 960 mil consumers. Focus on product innovations and user experience are what makes it different from its peers.

Alibaba also listed on a second listing. This was inside Hong Kong. The trading was made above the list price for shares.

However, Alibaba still faces hardships.

Meituan is giving Alibaba a competition in food delivery. Whereas, pinduoduo and are potential rivals in e-commerce.

Analysts predict that stocks will go forward. They have a $234.63 average price target for the stock. This represents an increase of 6 percent.

Diversification of Tencent

Tencent is one of the biggest gaming companies in the world. It runs China’s messaging app WeChat. Which has over 1 billion users.

The Chinese government in 2018 froze video game approvals. A regulatory approval was needed before their release. Or being monetized. This came as a bad news as video games are a huge share of the company’s revenue.

However, at the end of 2018. China reinstated approvals. The game division saw some recovery. The revenue grew by 11 percent each year.

Similar to Baidu, fall in advertising also hit Tencent. But in the third quarter, the advertising division came back to life.

Tencent has a lot in store. However, the analysts are eager for WeChat Moments. A feature Tencent and Wechat have been working on. Other advertising and social rose up to 32 percent each year.

The Diversification

Tencent is also diversifying. The company’s financial technology is growing. Along with cloud computing. It also runs a payment platform. Which is available on WeChat by the name WeChat Pay.

However, Tencent still faces difficulties ahead.

In the third quarter of 2019, the profit attributable fell by 13 percent. The net margin also decreased. The margin is said to continue into 2020.

Guotai Junan Securities; a China-based investment bank has said. The company is expected to maintain the momentum of profits via cost control. However, the margins will be under pressure.

Moreover, Tencent is said to have key gaming titles in the market. That too with a strong pipeline. This is said to support its video game business. However, the weakness in PC markets can increase the growth of mobile.

Smartphone games revenue is believed to be strengthened in the fourth quarter. This is mainly due to a strong game pipeline. However, the revenue growth of the PC is in doubt. This can bring down the growth of online games. partially in the year 2019 – 2020.

Analysts estimated a 415.79 target on the average dollar price of Hong Kong. This represents a 5 percent increase. The shares were nearly up by 20 percent in 2019.

Show More

Leave a Reply

Your email address will not be published. Required fields are marked *

Back to top button