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<Research>HSBC Research: CN Internet Giants Still Trade at Higher-Than-Avg. Discount to US Peers, Offering Upside Potential
Recommend 83 Positive 132 Negative 47 |
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Since the launch of ChatGPT4 in May 2023, the PEG valuations for major U.S. internet stocks once leapfrogged 78%, rising from 1.2x to 2.1x, and remained at 1.6x even after recent adjustments, HSBC Global Research’s report indicated. In contrast, the PEG revaluation for Chinese large-cap internet stocks was modest, increasing from 0.8x to 1x. On a P/E basis, Chinese internet giants traded at a 51% discount to their U.S. counterparts, well above the 10-year average of 28%, indicating room for upside. According to investor feedback cited by HSBC Global Research, the recent underperformance of U.S. peers has stoked a reallocation of capital toward China. The broker favored BABA-W (09988.HK) and TENCENT (00700.HK), raising their target prices due to improved long-term growth prospects. For Alibaba, accelerating customer management revenue growth on a higher take rate and more cloud demand from AI could drive a re-rating on Alibaba. Tencent was anticipated to benefit from higher ad load rates on its Video Account and search ads. The broker also preferred KUAISHOU-W (01024.HK), citing its Kling foundation model and AI-generated ads, which offer greater valuation expansion potential compared to Alibaba. Additionally, the broker saw upside for TAL Education (TAL.US) in its K9 tutoring segment, fueled by AI-powered smart learning devices, and BOSS ZHIPIN-W (02076.HK), which benefits from AI agent rollouts improving recruitment efficiency. The following table shows the broker's investment ratings and target prices for the above shares: Stocks│Investment Ratings│ TPs (HK$) BABA-W (09988.HK) │ Buy │ 156 -> 172 TENCENT (00700.HK) │ Buy │ 540 -> 610 KUAISHOU-W (01024.HK) │ Buy │ 68 -> 75 TAL Education Group (TAL.US)│Buy│US$14.6 BOSS ZHIPIN-W (02076.HK)│Buy│86 AAStocks Financial News |
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