M Stanley Expects CN Dotcoms to be Curbed by Weak Macro in 2024; Top Pick PDD; NetEase, Tencent, New Oriental, Tencent Music, Baidu Favored
Morgan Stanley released a report, saying that Chinese technology and internet stocks, have slightly outperformed the broader mainland stock market this year, but the performance of individual stocks has been differentiated.
It believes that next year's performance will continue to be dominated by non-market risks due to weak macro factors.
The market is focusing on leading stocks with adaptable content, stocks with unique growth potential and artificial intelligence concepts.
Game and music content providers such as NetEase (NTES.US), TENCENT (00700.HK) and Tencent Music (TME.US) continue to show resilience.
Meanwhile, the broker is also placing focus on PDD (PDD.US), which has a unique growth opportunity in local and overseas markets, and education stocks New Oriental (EDU.US) and TAL (TAL.US).
AI adoption remained gradual, but the broker remained constructive on Baidu (BIDU.US).
Related News: Nomura Downgrades Bilibili (BILI.US) to Neutral, Cuts TP to US$13
All of the above stocks are recommended by Morgan Stanley and rated Overweight, with Pinduoduo as the top pick. Alibaba (BABA.US), MEITUAN-W (03690.HK), JD.com (JD.US) and Bilibili (BILI.US) are meanwhile rated Equalweight.
The broker forecasted e-commerce, local services and advertising, to grow by 7%, 22% and 11% respectively next year, while cloud business will see a modest recovery of 12%, and games and music will grow by 9% and 22% respectively.
China's dot-com industry is expected to see revenue growth of 10%, operating profit growth of 23% and a 40 bps improvement in return on equity to 17.5% next year.
Source: AAStocks Financial News
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