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- Mizuho analyst James Lee expects 4Q22 to be soft for China's Internet, given the COVID impacts on business activity and consumer sentiment.
- The analyst anticipates the headwind reflected across all internet segments, including e-commerce, advertising, and cloud computing.
- The early checks from late December through the Chinese New Year holidays have been increasingly positive, evidenced by solid consumer discretionary spending.
- With the upcoming National Congress in March, Lee continued to expect a focus on consumption support of strategic industries as China achieves herd immunity.
- Lee maintained JD.Com, Inc (NASDAQ: JD) and Baidu, Inc (NASDAQ: BIDU) as top picks as he anticipated both companies to be market-share gainers from regulatory policies and a competitive environment.
- Lee maintained a Buy on JD and raised the price target from $82 to $85.
- Heading into FY23, Lee expects total revenue growth to resume double digits starting 2Q23, incrementally confident about additional margin expansion.
- JD remains his top pick in China on its potential to gain share and resilience against livestream competition.
- The analyst reiterated a Buy on Baidu and a $180 price target.
- Heading into FY23, the analyst expects the advertising business to resume positive growth starting 2Q23 and cloud business growth to accelerate meaningfully in the second half.
- Despite near-term uncertainty, the analyst liked BIDU long-term on its potential to gain cloud market share from public sectors and the potential upside from autonomous driving.
- Price Action: BIDU shares traded higher by 11% at $158.48 on the last check Tuesday.
| Mar 2022 | Susquehanna | Maintains | Positive | |
| Mar 2022 | China Renaissance | Maintains | Buy | |
| Jan 2022 | Mizuho | Maintains | Buy |
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