To The Moon

Yesterday, the trend of China concept stocks was very encouraging. Alibaba and Baidu rose by more than 14% in the first quarter, which greatly exceeded expectations, stimulating the collective rebound of China concept stocks.

It has to be said that the performance of Alibaba and Baidu in the first quarter was unexpected.

For example, Baidu's core business is online advertising. According to the quarterly reports of focus media, Jinshan office and Tencent holdings, the advertising business has declined by about 20%.

In the first quarter of the year, Baidu's online marketing service revenue fell only slightly by 4%!

The market is full of pessimistic expectations for Alibaba. Its core e-commerce business not only has to deal with the fierce "Three Kingdoms kill", but also faces the challenges of live e-commerce such as Tiktok and Kuaishou. In addition, in the first quarter, the national epidemic occurred frequently. Many investors are worried that the e-commerce business will decline.

However, the actual result was a year-on-year increase of 8%, which was faster than that in the fourth quarter of last year.

Are you surprised? Are you surprised? This is the impact of the first quarterly report of the two Internet giants on the market!

In addition to the good financial news, US Secretary of State Antony Blinken delivered a speech to China yesterday. From the content, it released a mild signal. For example, Antony Blinken said that the United States tried to avoid a new cold war with China, but to consolidate its own strength and launch a fair and just competition with China.

The progress of China US relations has a great impact on the sentiment of China concept stocks. In particular, the dispute over audit supervision may make foreign investors avoid China concept stocks.

Under the two positive supports, Hong Kong shares and a shares were magnificent at the opening today. However, after the closing, a shares rose and fell, and the intra day gains were lost. Several major Internet leaders in Hong Kong shares, such as Tencent, meituan and Kuaishou, rose and fell, and the gains were significantly narrowed.

The soaring prices of Alibaba and Baidu still failed to lead the Jedi to fight back!

The reason is that the first quarter reports of the two companies exceeded the expectations, which could not represent the performance of the whole China concept stock. In particular, Tencent, Kuaishou, Netease and other companies had released the first quarter reports before this. From the data point of view, some leading enterprises have poor performance.

Although the first quarter report of Alibaba Baidu exceeded expectations, in fact, life was not easy.

For example, Alibaba's revenue in the first quarter was 204.05 billion yuan, an increase of 8.9% year-on-year, which continued to slow down compared with the 9.7% growth in the fourth quarter of last year.

Considering that the outbreak of the epidemic in Shanghai is concentrated in the second quarter, and the epidemic in Beijing, the impact of poor Express Logistics on Ali will be concentrated in the second quarter.

In terms of business, Chinese commerce, mainly e-commerce businesses such as Taobao and tmall, had a revenue of 140.3 billion yuan in the first quarter, an increase of 8% year-on-year; International business, mainly international retail and wholesale business, had a revenue of 14.3 billion yuan in the first quarter, a year-on-year increase of 7%; Local living services, mainly e-mail and Gaode map, had a revenue of 10.4 billion yuan in the first quarter, a year-on-year increase of 29%; The revenue of cainiao logistics was 11.6 billion, a year-on-year increase of 16%; Alibaba cloud's business revenue was 19billion yuan, a year-on-year increase of 12%.

Although Alibaba has a revenue of more than RMB 200 billion in a quarter, its profitability is not strong.

For example, in China's commercial business, the adjusted profit margin was 23%, down 7 percentage points from the same period last year. In the first quarter report, the company said that the revenue of direct e-commerce business was 72.5 billion, accounting for 52% of China's commercial business, with a year-on-year growth rate of 14%, which was the main contributor to driving the business.

However, with reference to JD, which is dominated by direct e-commerce, although its revenue scale is huge and its annual revenue will approach trillion, its profitability is extremely low, its operating profit margin is only 1%, and its net interest rate is even negative. Large but not strong is a true portrayal of direct e-commerce.

Alibaba cloud, the second largest business, is imaginative in terms of prospects. In terms of profitability, the adjusted EBITA profit margin in the first quarter turned positive, which is a good signal.

However, the cloud business is greatly affected by the domestic macro environment. On the one hand, the investment of Internet customers is tight, and on the other hand, the real economy is experiencing difficulties for the time being. It still needs to improve the environment to return to high growth.

In addition to the macro difficulties, Alibaba cloud also has to cope with the competition. For example, Baidu's non advertising revenue in the first quarter was 5.7 billion, a year-on-year increase of 35%, and the growth rate was mainly driven by the cloud business.

Although the growth rate of local living services was the highest in the first quarter, the profit margin was -52%, and there was no hope of turning losses.

Cainiao logistics, referring to JD logistics and SF holdings, is also a large-scale industry with extremely low profit margin. Even if it makes profits in the future, it will make little contribution to the market value, which is not the core focus of Alibaba.

The prospect of digital entertainment business is also bleak. In the first quarter, after Youku reduced its content investment, it increased its adjusted EBITA profit margin from -34% to -25%. Although the profit margin improved, reducing content production is tantamount to self castration. How to deal with the fierce competition in the future is a difficult problem.

From the first quarter report of Alibaba, after the overall growth rate went down, the company turned its attention to cost optimization, hoping to control losses, improve profitability and add highlights.

Or just like this, the number of Alibaba employees fell by 4375 in the first quarter.

Baidu's situation is slightly optimistic. The core lies in the small scale of cloud business, which is still in an explosive period.

However, there are two problems: first, online marketing services almost lose their growth; Second, the cloud business also makes money at a loss.

Let's first look at online marketing services. Since 2016, this business has been sealed at 80billion yuan, which is difficult to break through:

At present, the cloud business has become the second growth curve of Baidu. From the perspective of revenue, it can lead Baidu to rejuvenate its second spring. But so far, the business is still in the stage of loss. After all, Alibaba cloud, which is larger in scale, has an adjusted EBITA margin of only 1%.

Although losing money, it is good to have growth. After the sharp decline in the share price, Baidu's Q1 report card is really surprising.

In general, the first quarter results of Baidu and Alibaba exceeded expectations, and more reflected their own efforts. For other China concept stocks, the driving effect was not obvious. Whether the whole China concept stock could fight back, either the policy dust settled or the performance improved collectively.

Assuming that the second quarter is the low point of the domestic economy, the dawn may come!

$Alibaba(BABA)$ $Baidu(BIDU)$ $JD.com(JD)$ $Pinduoduo Inc.(PDD)$