Just! The international big bank suddenly doubled, sharply raised the target price of Tencent, Ali, Meituan, etc., and doubled the highest! There are also flagship funds with 10 times more holdings, what signal is released?

Dot blue letter attention, do not get lost~

After drastically downgrading its ratings in March, the international bank JPMorgan Chase suddenly doubled across the board, upgrading most Chinese Internet companies.

On May 16, according to Bloomberg news, JPMorgan Chase today collectively upgraded the rating of a number of Internet companies, upgraded the rating of Tencent Holdings to over-allocation, and raised the target price from HK$265 to HK$470; for Alibaba, the target price of Hong Kong Stock Alibaba was raised from HK$75 to HK$130, and the target price of Alibaba in the United States was raised from US$75 to US$130...

JPMorgan Chase said in the research report that China's Internet industry is getting rid of various uncertainties and will be driven by short-term and long-term fundamental factors, so the company's stock price may rise more than expected.

International travel has turned upside down

In mid-March, JPMorgan Chase & Co. released 28 research reports downgrading more than a dozen Chinese Internet companies. At the same time, the stock prices of related companies have also fallen sharply.

On May 16, according to Bloomberg news, JPMorgan Chase decided to adjust the latest investment rating and target price of a number of Chinese-funded Internet shares after re-examining the basic situation of the Internet industry. Specifically:

Upgraded Tencent Holdings' rating to over-allocation, raising its target price from HK$265 to HK$470, and as of the latest closing date, Tencent's share price was HK$350.

The rating of Alibaba was upgraded to over-allocation, the target price of Hong Kong stock Alibaba was raised from HK$75 to HK$130, and the target price of US stock Alibaba was raised from US$75 to US$130; as of the latest closing date, Alibaba's Hong Kong stock price was reported at HK$84.6 and Alibaba's US stock price was REPORTED at US$87.99.

The Meituan rating was upgraded to overmatch, and the target price was raised from HK$105 to HK$220; as of the latest closing date, Meituan's share price was quoted at HK$163.5.

The rating of JD.com was upgraded to neutral, the target price of Hong Kong JD.com was raised from HK$155 to HK$235, and the target price of JD.com was raised from US$40 to US$58; as of the latest closing date, JD.com's Hong Kong stock price was reported at HK$200 and JD's US stock price was REPORTED at US$51.55.

The pinduoduo rating was upgraded to overmatch, and the target price was raised from $27 to $55; as of the latest closing date, Pinduoduo's U.S. stock price was reported at $37.72.

The Rating of NetEase was upgraded to over-allotment, the target price of Hong Kong Stock NetEase was raised from HK$93 to HK$185, and the target price of NetEase was raised from US$60 to US$120; as of the latest closing date, NetEase Hong Kong stock price was quoted at HK$142.1, and NetEase US stock price was reported at US$92.46.

In addition, JPMorgan Chase has also upgraded the ratings of Baidu, Shell, Bilibili, Zhihu and other ratings to neutral, and upgraded the ratings of iQiyi, Dada, Dingdong To buy vegetables and other ratings to over-matching. However, the ratings of Kuaishou, Weibo and Vipshop have not been adjusted, and the target price of Kuaishou has been lowered from HK$120 to HK$115, the target price of Weibo has been lowered from US$24 to US$22, and the target price of Vipshop has remained unchanged at US$8.

JPMorgan believes that industries such as digital entertainment, local services and e-commerce will be the first sectors to outperform the market, and late-stage verticals such as tourism and advertising should lag behind by 1-2 quarters.

Among them, in the field of digital entertainment, the performance of the game industry will be even better. In addition, e-commerce and local service operators will generate more direct revenue performance than the digital entertainment sector.

Compared with 2020, JPMorgan Chase believes that Internet stocks outperformed the broader market during the 2022 epidemic rebound. On the operational side, the increase in consumption and traffic in the digital entertainment sector will boost the stock's strong performance.

JPMorgan Chase's flagship fund increased its stake in JD.com by more than 10 times

Before the release of the research report, JPMorgan Chase had significantly increased its holdings in Internet stocks, and JD.com had increased its holdings by more than 10 times in just one month.

According to data recently released by Morningstar, JPMorgan Chase's flagship China fund, JPMorgan Funds - China Fund A (acc) – USD, had a large increase in Internet stocks during March, and JD.com Group was the fourth largest heavy stock with a market value of $212 million at the end of the period.

Tencent Holdings, the largest heavy stock, was also increased by the fund by 3.38%, with a market value of $527 million after the increase, and Meituan also received a 2.12% increase in the fund's holdings, with a market value of $324 million after the increase, ranking second largest heavy stock.

Screenshot from: Morningstar

In addition, the world's largest hedge fund Bridgewater, global asset management giant Fidelity International, etc. are also increasing their holdings of the Internet. On May 13, Bridgewater filed its first quarter 2022 position holdings report to the U.S. Securities and Exchange Commission (SEC). The report shows that Qiaoshui continued to increase its holdings in Alibaba, Pinduoduo, Bilibili, Weilai, Baidu and other Chinese stocks in the first quarter of this year.

Among them, Alibaba increased its holdings by 3.2122 million shares, an increase of 75%, and its market value at the end of the period reached 814 million US dollars, ranking the sixth largest heavy stock. Pinduoduo was increased by 2,277,500 shares, and Baidu was increased by 376,600 shares.

Fidelity International's funds are also paying more attention to the Internet. During March this year, China Consumer Power Fund, a subsidiary of Fidelity International, increased its stake in Meituan by 20.27%, with a market value of US$180 million after the increase, and a 10.22% stake in JD.com, with a market value of US$139 million after the increase.

Another Chinese equity fund owned by Fidelity International also increased its holdings in the Internet during March, with Alibaba and Tencent being the targets of the increase. According to Morningstar data, during March, Fidelity International's China Focus Fund increased its stake in Alibaba ADR by 32.29%, increasing its stake in Alibaba by 82.86%, and Tencent Holdings also increased its stake by 3.59%.

What do domestic institutions think?

2021 is a year of drastic changes in the Internet industry as a whole, the industry has faded the aura of high growth, high share and high profit margin under the impact of various unfavorable factors, and the stock price has also fallen sharply.

After entering 2022, unfavorable factors continue to emerge, and Internet stocks fell sharply in the first quarter of 2022, and then gradually stabilized. At present, with the change in the attitude of international banks to Internet stocks, it is worth looking forward to whether the stock price can return to a reasonable range.

CICC issued a research report at the beginning of this year, pointing out that from the rhythm of "emotional bottom - valuation bottom - performance bottom", the performance bottom is close at hand. In the short term, because of the expected poor performance in the fourth quarter of 2021 and the first quarter of 2022, it is difficult to have a large opportunity for the industry, and it can focus on the emotional fluctuation opportunities brought about by the trade-off of industry shares; in the medium term, the layout of long-term growth momentum and high barriers at the time of low expectations will be a good opportunity; in the long run, the emerging directions such as Internet hard technology in the next stage are also quietly brewing.

Everbright Securities also recently released a research report saying that in the medium and long term, the overall development prospects of the Internet industry are still promising. Considering that the current platform economy-related enterprises have achieved a certain first-mover advantage and have begun to actively carry out strategic adjustment and layout, it is expected that the platform economy will still achieve further development in the future. After the emergence of policy dawn, the Internet sector deserves active layout.

Everbright Securities believes that at present, Internet stocks have reached a time when they are worthy of active layout, and the valuation of related sectors is expected to be repaired in the short term, and the long-term sector performance will return to industry fundamentals.

Editor: Wan Jianyi

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