China's internet sector rebounded strongly over the past 2 weeks on improved market sentiment, with key drivers including upcoming 1Q24 results, UBS issued a research report saying. With the release of 4Q23 results between late February and March, UBS believed that much of the management guidance should have been reflected in the 1Q24 forecast.
UBS remained bullish on stocks with high earnings visibility, near-term catalysts and high growth, such as PDD Holdings Inc. (PDD.US) , which should be well-priced at 15x FY2024 PE ratio to take into account geopolitical risks, with domestic GMV remaining strong in 1Q24.
Meanwhile, UBS was bullish on TENCENT (00700.HK) +3.600 (+0.952%) Short selling $725.35M; Ratio 8.790% and MEITUAN-W (03690.HK) -0.400 (-0.327%) Short selling $649.00M; Ratio 13.722% , as TENCENT's Wexin ecosystem has not yet fully monetized, coupled with long-term growth momentum brought by the revival of its key game IPs.
MEITUAN-W's competition with Douyin is stabilizing. UBS elevated its target price on MEITUAN-W to $146 from $135, as the company has stronger confidence on the competitive landscape.
In the short term, UBS believed that the market will gradually focus on quality stocks with laggard valuations, and also liked JD-SW (09618.HK) -0.200 (-0.155%) Short selling $263.83M; Ratio 17.476% , KUAISHOU-W (01024.HK) +0.400 (+0.701%) Short selling $717.73M; Ratio 25.928% and NTES-S (09999.HK) +2.400 (+1.552%) Short selling $156.00M; Ratio 14.704% , which are about to release their results.
UBS expected KUAISHOU-W's margins to have the potential to rise, and was mainly concerned about shareholders' returns, with a possible extension of its $4 billion share buyback program that is set to expire on 13 June.
Furthermore, UBS rated BABA-SW (09988.HK) +1.500 (+1.848%) Short selling $634.39M; Ratio 9.795% at Neutral, with stronger customer management revenue growth and margin growth brought by non-core businesses. UBS will focus on its full-year dividend and margin outlook, believing that it has potential for margin upside.
(HK stocks quote is delayed for at least 15 mins.Short Selling Data as at 2024-05-14 16:25.) (Real-time Streaming US Stocks Quote; Except All OTC quotes are at least 15 minutes delayed.)
