Macquarie ups rating on PDD, BABA under Chinese internet picks, lists JD and DIDIY as favorite
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- Macquarie Equity Research made notable changes under its coverage of U.S.-listed Chinese Internet stocks on Monday.
- They said Chinese local services, ecommerce, and travel stand out as key sectors that offer “quality at discount” and listed JD.com (NASDAQ:JD) and DiDi Global (OTCPK:DIDIY) as top U.S. equity picks in their portfolio and reiterated “outperform” on them.
- The research firm upgraded both U.S. and Hong Kong-listed shares of Alibaba (NYSE:BABA) to “outperform” from “neutral,” lifted their core TTG EV/EBITA multiple from 5x to 10x, and rolled forward to CY2025 estimates.
- PDD (NASDAQ:PDD) was upgraded to “outperform” from “neutral” on a more stable landscape as BABA, but noted that more intense competition in low-price categories could result in market share losses.
- “Valuations across China’s internet sector are always framed around the combination of growth and earnings. While the sector’s top line indeed showed significant deterioration since early 2023, mainly weighed down by sluggish consumption and depressed pricing, earnings have exceeded general expectations significantly, with a 25% revision higher over the same period,” the research firm said in their October 7 note.