To The Moon

Hello, Tigers!

After the U.S. election’s large swings last week, this week brings the Chinese ADR earnings season, with companies like Tiger Brokers, Tencent, JD.com, Alibaba, and NetEase scheduled to release their reports.

Additionally, Bitcoin has reached the $90,000 mark, and many investors are seeing significant gains. What should our next strategic move be?

1.Earnings Expectations for This Week’s Chinese ADRs

This week, the focus is on three key players: Tencent Holdings, JD.com, and Alibaba.

1. Tencent Holdings

Tencent will report earnings pre-market on Wednesday, with analysts split on its outlook.

Some analysts view Tencent as the top choice amid China’s new stimulus, which centers around a remarkable 800 billion RMB ($114 billion) liquidity injection aimed at boosting the stock market.

Given Tencent's exposure to consumer spending, recent Chinese stimulus measures could drive its growth rate back to double digits.

Detailed Breakdown:

A. Gaming Growth: As consumer confidence and liquidity improve, discretionary spending on entertainment, including mobile gaming, could rise. Tencent’s domestic and international game divisions achieved 9% growth in Q2, and they are well-positioned to capture this trend. Popular games like VALORANT, Dungeon Fighter Mobile, and PUBG Mobile are likely to maintain momentum with improved consumer sentiment.

B. Advertising Revenue: Stimulus policies promoting consumer spending could expand corporate ad budgets, benefiting Tencent's advertising segment. With corporate spending on digital ads to meet revived demand, Tencent’s platforms—especially its video account, which saw ad revenue grow 80% YoY in Q2—should see gains.

C. FinTech and Commercial Services Recovery: Stimulus measures aimed at bolstering consumer confidence are likely to accelerate fintech growth, driving higher transaction volumes for Tencent’s commercial payment services. Its cloud and commercial services should also benefit from economic recovery and increased digitalization across industries.

Overall, with the stimulus boosting market sentiment, investors may want to reassess Tencent's risk-reward profile, as analysts argue that Tencent’s valuation may now be too conservative given its strength across social media, gaming, fintech, and cloud services.

On the other hand, some analysts remain cautious, noting the following:

A. Tencent’s gaming division faces challenges with developing globally competitive IP.

B. Ad growth could be limited by a plateauing user base, primarily within WeChat.

C. Fintech growth has plateaued due to regulatory constraints and high market penetration, meaning investors may no longer value this segment as highly.

2. JD.com

Analysts at Bloomberg highlight that, unlike its peers Alibaba (BABA) and Pinduoduo (PDD), JD.com has shown stable profits, despite its low valuation. JD boasts substantial liquidity, with $28 billion in cash and minimal debt, yet its enterprise value is only about $24 billion (5.6x TTM net income).

While JD faces growth challenges, recent stability could signal a return to growth. Additionally, low interest rates should boost liquidity, aiding JD’s income and valuation multiples.

Technically, JD’s chart may also be showing signs of a potential recovery from a prolonged bearish trend since early 2021, with a reverse head and shoulders pattern forming.

3. Alibaba

Reports indicate progress with Ant Group’s IPO, potentially acting as a hidden catalyst for Alibaba’s share price.

Analysts have adjusted Alibaba’s intrinsic value by factoring in Ant Group’s potential post-IPO market cap. Fidelity, BlackRock, and T. Rowe Price have varied in their valuation of Ant, from $64 billion to $151 billion.

Ant Group’s valuation, even with regulatory impacts, offers long-term value to Alibaba shareholders.

2.Will Cryptocurrencies Continue to Rise?

Analysts believe there’s still room for growth in crypto for the next 3-4 months, citing three factors:

A. Trump Administration’s Crypto-Friendly Stance: Key team members, including the vice president, support crypto-friendly policies.

B. Replacement of the SEC Chair: Trump’s past remarks imply that a more crypto-friendly SEC leader could replace Gensler.

C. Rate Cuts: Trump advocates for significant rate cuts, potentially spurring Bitcoin and inflation-hedge assets.

3.Trading Focus This Week

A. Chinese ADRs

• Potential Trades:

B. Cryptocurrency-Related

• Potential Trades:

Please share your thoughts in the comments!

Risk Disclaimer: The above trade ideas are based on data and do not constitute investment advice.