To The Moon

Kuaishou caught my attention as the outlook for Kuaishou’s growth in 2023 is quite positive, driven by both macroeconomic factors and company-specific initiatives. These include the introduction of new features like the shopping mall and search ads, which is expected to boost revenue growth and cost efficiency.

There are two reasons why I am fond of Kuaishou: (1) the growth potential in ads revenue and eCommerce GMV is very promising, and (2) the Company has a clear plan to achieve breakeven in 2023.

Solid GMV and Ad revenue growth!

Kuaishou's e-commerce outlook for 2023 is promising. E-commerce GMV grew by 33% in 2022 and it can largely be attributed to platform traffic conversion (converting traffic from digital entertainment to active customers in e-commerce), as well as an increase in average revenue per user (ARPU) as contribution from branded product GMV increased to 30% of total GMV in 4Q22, up from 10% in 4Q21.

Kuaishou's e-commerce GMV should be able to maintain a growth rate of 30% in 2023, driven by normalization of logistics, consumption recovery, and further traffic conversion, while there is still significant potential for Kuaishou’s daily active customers to continue growing with high ROI promotion.

Ads revenue grew 14% in 2022, and the growth is likely to accelerate in 2023 due to a macroeconomic recovery and low base effect starting from the second quarter of 2023, resumption of positive growth in external ads revenue in 2H2023 driven by normalized ad spend from verticals such as Internet service and gaming, as well as the growth of other ad formats, such as brand ads, search ads (which had 400 million monthly users in 4Q22), and Union ads.

Clear path to profitability in 2023

Kuaishou will likely achieve profitability at the group level by the third quarter of 2023 and maintain full-year profitability for the year, due to its strong revenue growth and cost optimization measures. While achieving breakeven results on a quarterly or annual basis may not be viewed as stock catalysts as they are already expected by investors, consistent profit growth post breakeven could serve as a crucial catalyst for the stock.

Conclusion

Despite the growing competition in the market, I am rather optimistic about the long-term global trend of video consumption and expect this market to experience continued rapid growth. Kuaishou has successfully established high user duration, user stickiness, and engagement, which creates significant potential for commercialization. I believe these factors will provide a strong barrier to entry for competitors and ensure Kuaishou's continued success. Will continue to keep an eye on this company!

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