JPMorgan believes that Alibaba's new investment strategy has achieved preliminary success, with its domestic e-commerce commodity trade volume (GMV) growth rate consistent with the industry growth rate. If this trend continues in the coming quarters, it may become the largest consumer stock in China. Goldman Sachs also stated that the introduction of WeChat Pay on Taobao is beneficial for developing the lower-tier markets and promoting further cooperation between Alibaba and Tencent.
Both Goldman Sachs and JPMorgan are bullish.$BABA-W (09988.HK)$they believe that the introduction of WeChat Pay by Taobao will pave the way for further cooperation between Alibaba and Tencent.$PDD Holdings (PDD.US)$The new monetization strategy proposed a week ago has little impact on Alibaba. Alibaba's new investment strategy has achieved initial success and may evolve into China's largest consumer stocks in the future.
Goldman Sachs believes that Taobao's announcement of adding WeChat Pay is beneficial for Taobao to further develop the sinking market and provide more convenience to existing users, thereby driving user penetration rate and total commodity trade volume growth.
JPMorgan said that the new monetization strategy of PDD Holdings has limited impact on Alibaba, because PDD Holdings' new strategy mainly focuses on the merchant ecosystem rather than the consumer end; coupled with the significant difference in monetization rates between Alibaba and PDD Holdings, even if Taobao's monetization rate improves, it may still be the lowest-cost channel for merchants. $Alibaba (BABA.US)$And the monetization rate difference between Taobao and PDD Holdings is quite large, so even if Taobao's monetization rate improves, it may still be the lowest-cost channel for merchants.
JPMorgan is also bullish on the growth trend of Alibaba's domestic e-commerce commodity trade volume (GMV), believing that Alibaba's narrative in the next 6-12 months will change from being a 'market share relinquisher' to a 'stable e-commerce growth stock', and the accelerated inclusion of 'Hong Kong Stock Connect' and Customer Management Revenue (CMR) growth will become short-term catalysts.
Taobao and Tmall introduce WeChat Pay.
In November 2013, Taobao and WeChat blocked each other, nearly 11 years ago.
On September 4th, Alibaba announced the first introduction of WeChat Pay on the Taobao and Tmall platforms; Goldman Sachs stated that this change was in line with its expectations, as from September 1st, Tmall started to charge software service fees (covering payment processing costs), creating conditions for the platform to expand online payment options.
Goldman Sachs believes that adding WeChat Pay can help Taobao and Tmall attract new user groups, especially beneficial for developing users in lower-tier cities, and providing more convenience to existing users, thereby driving user penetration and total commodity trading volume growth.
In addition, the Taobao Tmall Group has already collaborated with Tencent in WeChat advertising campaigns for multiple quarters. Goldman Sachs believes that the introduction of WeChat Pay by Taobao and Tmall this time can further pave the way for Alibaba and Tencent to cooperate. For example, in the future, Taobao-Tmall may have mini programs in the WeChat ecosystem.
This is significant for Alibaba, as Tencent dominates China's social applications with over 1 billion monthly active users, while Alibaba is the only e-commerce platform that does not yet have a shopping mini program in the WeChat ecosystem. According to Quest Mobile statistics, there are approximately 247 million WeChat users in China who have not installed the Taobao application.
Meanwhile, Goldman Sachs also noted that Alipay recently launched mini programs for Meituan for takeout and Meituan Hotels, whereas previously users could only order food delivery through Alipay. Goldman Sachs believes that after the Alibaba antitrust review was completed, Chinese regulatory authorities announced on August 30, 2024, a significant milestone of cooperation between internet giants. Subsequently, cooperation between internet giants increased, no longer in the relatively closed ecosystem as before.
New strategy of PDD Holdings has limited impact on Alibaba monetization
On August 29th, the PDD Holdings conference call proposed a new investment strategy, including allocating 10 billion yuan to support high-quality merchants, improving platform ecosystem construction, and refunding commissions and advertising fees for direct refund orders.
J.P. Morgan said:
"The new monetization strategy of PDD Holdings has limited impact on Alibaba, because PDD Holdings' new strategy mainly focuses on the merchant ecosystem rather than the consumer end. PDD Holdings' investment in the merchant ecosystem is intended to improve the supply ecosystem for long-term sustainable growth, rather than seeking the greatest market share growth in the short term."
In the current retail environment, improving the profitability of high-quality merchants has little impact on consumer spending, and therefore will not have a significant impact on the total volume of commodity trade in Alibaba's domestic e-commerce business.
The slight improvement in Taobao's monetization rate has little impact.
Over the past three years, Alibaba has been relatively restrained in monetizing its e-commerce business, while its peers have significantly increased their e-commerce monetization during the same period. JPMorgan Chase said that the difference in monetization rates between Alibaba and PDD may be larger than it seems, as Alibaba's investment strategy has led to faster growth in low-price channels compared to high-price channels.
For example, JPMorgan Chase estimates that Tmall's monetization rate is 6%, while Taobao's is 2% and PDD's is over 5%. Therefore, even if Taobao's monetization rate improves, it may still be the lowest-cost channel for merchants, and Alibaba's moderate increase in monetization rate will not change its relative value proposition for merchants.
Editor/ping