Thanks to the unpredictable influence of politics in China, fear has penetrated the minds of investors, owning and / or considering shares of many Chinese companies. Alibaba Group Holding and Tencent Holdings – two of China's most influential tech companies , but these recent concerns have caused stock prices to decline by about a 40% for each from mid-February.
Prospects of technology companies
According to the general opinion of investors, when prices for quality companies fall, often there is an opportunity to buy. But in this case, investors should consider as pros., and cons, before choosing these two techies.
Alibaba and Tencent – two of the largest technology companies in the world, based countries with the second largest economy in the world – China. These are huge conglomerates., who are well positioned in the most important aspects of consumer life in China.
Alibaba – this is a company, engaged in e-commerce, which provides retail and logistics services via the Internet more than 900 millions of consumers in China and more than 1,1 billion consumers worldwide.
Alibaba also manages various other business segments., including cloud computing, and it belongs to 33% fintech giant Ant Group, which is managed by Alipay, the most popular digital payment platform in China.
Tencent – is an internet company, which offers consumers in China a variety of payment services, Applications, Advertising, video развлечений, games and social networks. More 1,25 a billion users use Tencent's social media platform, and its digital payments business Tenpay is teaming up with Alipay for something like this. 90% third-party payments in China.
Chinese wealth
Alibaba's revenue in 2021 the fiscal year was 109 billion dollars (which usually coincides with the calendar 2020 year), and Tencent – 74 billion dollars in 2020 fiscal year.
- Currently, Alibaba and Tencent have equivalents in US dollars on their balance sheets. 73 And 39 billion dollars respectively. Shares of Alibaba and Tencent share a total market cap of almost 1 trillion dollars (448 And 524 billion dollars respectively), despite the decline in share price over the past six months.
Based on Alibaba's expected revenue in 2022 fiscal year (calendar 2021 year) in size 142 billions of dollars and Tencent's expected revenue in 2021 year in the amount of 90 billion dollars, shares are traded at a price-to-sales ratio 3,1 And 5,8 respectively.
Alibaba service is used by more than a billion people from around the worldAlibaba service is used by more than a billion people from around the world
Investors, buying shares of Alibaba and Tencent, in fact, count on the easing of political pressure and on that, that these companies will be allowed to operate without much government interference..
Every company continues to grow, that's why, if the grades return to the end 2020 of the year, growth potential will become, to put it mildly, interesting attachment. But the problem is, what we can't know for sure, what the Chinese government will do in the future.
Uncertainty – this, in the end, Alibaba and Tencent problem. We can't know, to what extent and for how long these companies will be subject to intervention.
- What, if Tencent is required to donate more of its profits in the future?
- What, if Chinese regulators decide to separate Alibaba from its stake in Ant Group?
Given the opportunity cost of ownership of these shares, to find these answers, it may be a good idea for investors to fully explore other investment opportunities, before you buy shares of Alibaba or Tencent.
