The global market in digital transformation is expected to see a CAGR of 18.5% between 2020 and 2025. And the pace of automation in China is the world’s fastest. Given the country’s manufacturing cost advantage in the global markets, its tech companies have the potential to grow exponentially with rising international demand for their products and services…
However, China’s proposed anti-monopolistic regulations to cover the internet industry are expected to hurt tech giants such as Alibaba Group Holding Limited (BABA), Tencent Holdings Limited (TCEHY) and JD.com, Inc. (JD). So, we believe, the nation’s smaller tech players should benefit from taking chunks of market share from these giants.
The unique offerings and financial flexibility of lesser-known Chinese companies like JOYY, Inc. (YY – Get Rating), Sina Corporation (SINA – Get Rating), and Renren, Inc. (RENN – Get Rating) position them well to benefit significantly from both the country’s rapid automation and likely limits to be placed on tech giants.
JOYY, Inc. (YY – Get Rating)
YY runs an online social media platform in China. The platform allows users to engage in real-time activities involving text, video, and voice. YY’s stock has gained 40.3% over the past year.
YY recently entered an agreement with Baidu, Inc. (BIDU) to sell its live streaming business for approximately $3.6 billion. The sale will include the YY mobile app, YY.com website, along with PC YY.
For the quarter ended September 30, 2020, the company saw an increase in revenue of 36.1% versus the same period last year. The company’s non-GAAP net income has increased 64% during the same period.
YY is expected to see a revenue growth of 12.2% in 2021. Its EPS is estimated to grow 35.4% in 2021 and at a rate of 3.5% per annum over the next five years.
How does YY stack up for the POWR Ratings?
A for Trade Grade
B for Peer Grade
B for Industry Rank
B for Overall POWR Rating
The stock is ranked #24 of 103 stocks in the China industry.
Sina Corporation (SINA – Get Rating)
SINA runs as an online media company in China. The company operates primarily SINA.com, an online brand advertising portal. SINA’s stock has returned 30% over the past nine months.
SINA recently announced that it will merge with New Wave Holdings Ltd, which provides entertainment services. The merger implies an equity value of $2.59 billion for SINA.
For the quarter ended June 30, 2020, the company saw a 16% increase in non-advertising revenue versus the same period last year. Its advertising gross margin during the quarter grew to 82% compared to 80% during the previous year.
SINA’s revenue is estimated to…
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