JPMorgan Releases A Barrage Of Coverage On Chinese Internet Stocks

JPMorgan analysts Alex Yao and Binbin Ding believe the "demographic dividend" internet growth in China has come to an end. As a result, the firm's focus will shift toward quality from quantity, i.e., customer engagement from user numbers.

The brokerage picked up Alibaba Group Holding Ltd BABA and Tencent TCEHY TCTZF for demonstrating solid progress in increasing their user engagement by launching content and services. On the other hand, Baidu Inc (ADR) BIDU is witnessing a loss in the user engagement. The lead analysts think the companies are well-placed to take advantage of user engagement, including social media.

Related Link: JPMorgan Sees Sohu.com Gaming Revenue Falling 38% In 2016

"Despite China's >50 percent Internet penetration, most of the consumption behaviors remain relatively under-penetrated. Thus players with increasing user engagement are well positioned to capture the next leg of growth. Further, the change will widen the divergence in Internet development between China and US," the analysts told their clients in a research note.

The brokerage pointed out the stock prices of the big companies witnessed average growth of 25 percent compared to 10 percent appreciation in smaller companies over the last three-month period. On the other hand, Nasdaq gained 6 percent while Hang Seng advanced 11 percent in the same period.

Overweight Names

The following companies are rated as Overweight:

• Tencent Holdings.
• Alibaba.
• Ctrip.com International, Ltd. (ADR) CTRP.
• Weibo Corp (ADR) WB.
• YY Inc (ADR) YY.
• Momo Inc (ADR) MOMO.
• Bitauto Hldg Ltd (ADR) BITA.
• Phoenix New Media Ltd ADR FENG.

Neutral-Rated Names

The following stocks are rated with Neutral:

• JD.Com Inc(ADR) JD.
• Vipshop Holdings Ltd - ADR VIPS.
• Autohome Inc (ADR) ATHM.
• SouFun Holdings Ltd SFUN.
• Leju Holdings Ltd (ADR) LEJU.

Underweight Names

The following stocks are rated Underweight:

• Baidu.
• Sohu.com Inc SOHU.

Full ratings data available on Benzinga Pro.

Do you have ideas for articles/interviews you'd like to see more of on Benzinga? Please email feedback@benzinga.com with your best article ideas. One person will be randomly selected to win a $20 Amazon gift card!