Morgan Stanley boosts price targets for Alibaba, Baidu and e-commerce upstarts as bank says China internet sector ‘attractive’
- US bank expects “accelerated diversification” to reach more businesses and government, in local and overseas markets
- Xiaomi, live streaming players get thumbs down amid pressure in their business lines
Morgan Stanley has raised the price targets of Alibaba Group Holding, Baidu, Pinduoduo and Meituan Dianping as the US investment bank upgraded China’s internet sector to “attractive” level in a research note published on Monday.
The sector is expected to show “accelerated diversification” to expand their reach from consumers to businesses and government, Hong Kong-based analyst Grace Chen wrote in the report. The bank also expects that momentum to carry into lower-tier cities and into overseas markets, with cost discipline to support sales growth, according to the report.
The size of China’s e-commerce is expected to grow by 18 per cent to 12.7 trillion yuan in 2020, mainly driven by a penetrating in less-developed areas, the bank said. The 26 companies under Morgan Stanley’s sector coverage, including leading players Alibaba, Baidu and Tencent Holdings, are seen generating 24 per cent more profits to 376 billion yuan on the back of 24 per cent jump in sales to 2.6 trillion yuan.
“We see diminishing risks of further cuts to sales and earnings estimates against moderated market expectations in view of easing regulatory and competitive concerns,” the bank said.
Morgan Stanley increased the 12-month price target for Alibaba shares to US$245 from US$215, saying its positive stance is based on its sustained strength in e-commerce and attractive valuation. Lower-tier cities are becoming a new growth driver, adding to its leading position in business-to-consumer and business-to-business platforms.