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China Internet Was Strong in Q1, Says Goldman Sachs (QIHU) (SINA) (WB) (BIDU)

June 4, 2014 7:51 AM EDT
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In a research note Wednesday, analyst Piyush Mubayi of Goldman Sachs discussed China internet stocks. The reported noted games led mobile monetization in Q1, search, video, social drove ad spending, and e-commerce volume consolidated.

Companies mentioned include Sina Corp (NASDAQ: SINA), Weibo (NASDAQ: WB), Sohu.com, Inc. (NASDAQ: SOHU), Autohome ADS (NYSE: ATHM), Changyou (NASDAQ: CYOU), QUNAR (NASDAQ: QUNR), TAL Education Group (NYSE: XRS), Tarena (NASDAQ: TEDU), Xueda Education Group (NYSE: XUE), Vipshop Holdings (NYSE: VIPS), YY Inc(NASDAQ: YY), Phoenix New Media (NYSE: FENG), Netease.com (NASDAQ: NTES), Baidu.com SP ADR (NASDAQ: BIDU), JD.com (NASDAQ: JD), and E-Commerce China Dangdang (NYSE: DANG), Qihoo 360 Technology (NYSE: QIHU).


"Rising mobile Internet penetration accelerated mobile game spending. Tencent and Qihoo, with significant exposure to smartphone gamers,delivered strong 1Q results. Tencent reported Rmb1.8bn game revenues from Weixin (+200% qoq), which were highly margin accretive due to the plethora of in-house titles, and favorable sharing terms with developers. Qihoo's mobile revenues grew to US$58mn in 1Q, +US$20mn qoq, with the overall gaming platform featuring 1k titles and hosting 1mn paying users, 75% on mobile. On desktop, new games such as Blade & Soul are replacing classic role-playing titles (e.g. Tencent’s D&F, Changyou’s TLBB) which experienced weakness as a result of product maturity," said Mubayi.

"Technology investments in deep learning and language processing enhanced Baidu’s cost-per-click and paid click coverage. Management expects that domestic mobile queries will exceed desktop by end-2014. The video sector was also strong. Tencent / Sohu reported 100%/78% yoy revenues, iQiyi achieved top user time spend for its premium content, and Youku Tudou received investments from Alibaba Group. Socially, performance-based solutions from Tencent (Guang Dian Tong) and Weibo (Fen Si Tong) grew online ad penetration among SME accounts," he continued.

"Scaled e-commerce operators gained volume share against smaller ones. JD.com / Vipshop / Dangdang reported 65%/126% /30% yoy revenue growth in 1Q, all faster than iResearch’s volume estimate of 28% yoy, suggesting share consolidation. In travel, Ctrip and Qunar both reported strong volume growth, substantially outpacing global peers. Ctrip’s investment in Tong Cheng and Tuniu also pointed to a consolidation trend," he said.

For an analyst ratings summary and ratings history on SINA Corporation click here. For more ratings news on SINA Corporation click here.

Shares of SINA Corporation closed at $44.28 yesterday.



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