China Internet: Morgan Stanley’s Top Picks For 2017
By Shuli Ren
Chinese Internet companies can still expect healthy growth in the next two years.
According to Morgan Stanley, they can grow their sales by 27% annually, although it was a sharp slowdown from 44% in the last two years.
Morgan Stanley sees an annualized 27% revenue growth in 2016-2018
In 2017, Internet companies that can get users to stay on their sites and apps longer are the winners, so are the ones that can open users’ purse strings, or the ones that can branch out to new businesses.
As such, the bank’s top picks for 2017 are Alibaba Group (BABA), Tencent Holdings (700.Hong Kong/TCEHY), Momo (MOMO), Ctrip.com (CTRP) and JD.com (JD).
Analyst Grace Chen wrote:
Alibaba has been enriching social features in the Taobao app to enhance user stickiness, increasing monetization given getter targeting technology, and emphasizing globalization and cloud.
Tencent launched “Mini-program” in January 2017, which helped both user retention and monetization, its aggressive M&A strategies helped expand its global footprint, and its fast-growing payment business is helping to broaden its product lineup.
Ctrip is our long-term top pick among online verticals because of its dominant position in a fast-growing industry. Ctrip has been aggressive in expanding overseas. In late 2016, it acquired Skyscnner, a UK-based meta search and two US tour operations. As a result, the GMV contribution from the international markets has been increasing.
Momo’s live broadcasting and short video product initiatives have been boosting its overall user engagement/time spent/retention as well as the monetization level of the platform. We expect Momo to leverage the strong cash flow generated by live broadcasting to expand the user base and develop new product initiatives, which will in return further drive long-term monetization.
JD stands out because of its margin improvement potential and the positive impact on profits that we expect after it spins off loss making JD Finance.
Source: Barron's Asia
http://blogs.barrons.com/asiastocks/201 ... -for-2017/