Three Chinese Internet Stocks to Own for Long-Term Growth
NEW YORK (TheStreet) — Chinese Internet companies Alibaba, Baidu (BIDU_) and Tencent(TCEHY_) are spending heavily on research and development and on acquisitions, spending that should allow the companies to continue to dominate their fields and make them good long-term investments.
Alibaba dominates e-commerce, Baidu drives China’s Internet traffic with its search engine, and Tencent is ahead on social platforms and games.
Baidu’s American depository receipts trade on the Nasdaq, and Tencent’s ADRs trade on the over-the-counter Bulletin Board.
Alibaba is expected to have its IPO on the New York Stock Exchange in September. The deal is estimated to bring in more than $20 billion, which would make it the biggest IPO ever.
The Street’s Jim Cramer has fears about Alibaba’s IPO, but long term, the company should continue to grow.
In China’s e-commerce sector, Alibaba’s twin engines, Tmall and Taobao, should continue to power revenue. Taobao has no credible rival in the consumer-to-consumer field, and it profits from Internet shopping bonanzas such as last year’s $5.75 billion Single’s Day, the day each November in China that was known for unmarried people for celebrating singles’ life but that has become an online shopping holiday.
Meanwhile, Tmall controls half of China’s online business-to-consumer market, which was worth $300 billion in 2013. Its nearest competitor, JD, is trailing at 20%, with next nearest rivals in the single digits.
Some pundits are placing undue confidence in JD’s alliance with WeChat, China’s popular instant-messaging service that now offers an exclusive JD.com shopping channel. But Alibaba’s similar partnership with Sina Weibo, which had been China’s most popular social-media platform, reaped no great rewards. In fact, it may have convinced more Weibo users to migrate to the less commercial WeChat.