In my mind a big rotation from US tech to China tech is coming. Everyone knows the power of amazon, facebook and google. Most of these companies are valued on growth and they are going to start running up against strong incumbants like Walmart for Amazon and banks/insurance companies for Google. Even Facebook has problems creating a consolidated social network and as a result is having a hard time building something like a Wechat.
Chinese tech companies have a lack of scaled large incumbent competitors. Tencent completely dominates social media. While there is ecommerce competition between BABA and JD there isn't a whole lot of bricks and mortars built so it is pure green pastures for many retail categories. Both alibaba and tencent are basically banks already, having massive money transfer volumes, money market funds, and financial products directly linked through their platforms. Tencent's latest money xfer number is something like USD100 billion/month.
From a tech eats the world play perspective, people will soon realize that China will be place where this happens first, not in the U.S. As a result, you will see Chinese tech companies maintain their strong growth while US tech is likely to slow down at some point.
Best companies to play these trends are: Alibaba, Tencent, JD, Baidu, Netease.
Lets now compare valuations (since these are valued on growth, lets look at toplines)
(all converted to USD)
Social Media:
Facebook: 37bn in Q1 run-rate rev vs 500bn market cap, 54% rev growth
Tencent: 29bn in Q1 run-rate rev vs 370bn market cap, 48% rev growth
Ecommerce:
Amazon: ~300bn GMV vs 488bn mkt cap, 26% rev growth
BABA: 547bn GMV vs 403bn mkt cap, 56% rev growth
JD: 107bn GMV vs 64bn mkt cap, 44% rev growth
Search Engine
Google: 90bn rev vs 656bn mkt cap, 20% rev growth
Baidu: 10bn rev vs 77bn mkt cap, 6% rev growth
Gaming
Activision: Q1 6.7bn run-rate rev vs 45bn mkt cap, one time 40% jump in 16, flat for 4 years prior, 15% CAGR Netease: Q1 8bn run-rate rev vs 41bn mkt cap, 67% rev growth
Out of these groups, we see that generally Chinese tech companies are trading below their u.s counterparts, which is fair given governance and country risk issues. However, growth rate differential are quite large, with most of the chinese companies continuing to grow at 40-50% while the us tech companies have slowed to 20-30% outside of facebook. As a result there is a massive growth premium in Chinese tech being discounted here. Out of the group, JD and Netease stand out as being cheap relative to comps as well as generating substantial growth.
But what the fuck do i know, go buy your SPY etf or w/e
Submitted July 28, 2017 at 02:58PM by vegaseller http://ift.tt/2vfb4S2
