by Jim Woods | May 20, 2014 11:21 am
China’s e-commerce numbers are in, and according to the firm iResearch, China’s e-commerce sector has grown “27.6% from a year ago to 456 billion yuan in transaction value,” as reported in Barron’s. The data from iResearch showed that, while so-called consumer-to-consumer (C2C) e-commerce accounted for 60% of the total transaction value, the or business-to-consumer (B2C) segment experienced the faster improvement, with year-over-year growth of 44.6%.
The boom in China’s e-commerce segment is mostly driven by the mobile e-commerce segment, as most Chinese access the web and do all sorts of business direct from their handsets. In fact, Mobile e-commerce grew 141% year-over-year in the first quarter, according to iResearch, and “Mobile e-commerce now accounts for 14% of the total market.”
The massive market that is China’s e-commerce is dominated by soon-to-be–public Alibaba Group, which is 22% owned by Yahoo (YHOO). The Alibaba IPO could be the biggest tech-IPO ever, as investors realize the tremendous growth opportunity in the Chinese e-commerce space.
Yet investors don’t have to wait for Alibaba to go public to take advantage of China’s e-commerce stocks. Here are three ways you can that right now.
Want to make an impulse purchase at a discount? A lot of Chinese sure do, and feeding that desire is online flash sale site Vipshop Holdings (VIPS). The company grew at a breakneck pace during Q1, with year-over-year sales spiking 126% to $701.9 million. That impressive top line easily bested expectations for revenue of just $658.9 million. The company sees no signs of slowing in Q2, expecting revenue for the next three months to be between $780 million and $790 million — nearly a 125% growth rate on the top end.
Reaction to the strong earnings report last week was overwhelmingly bullish on the part of Wall Street, as VIPS stock was upgraded by several firms, including Deutsche Bank, Brean Capital and Goldman Sachs. Yet perhaps the most impressive thing about VIPS stock is the price performance. Year-to-date, VIPS stock is up an amazing 97%, and the shares are up nearly 400% in a little more than a year.
Mobile gaming is really, really huge in China, much more so than anywhere else in the world. China Mobile Games & Entertainment Group (CMGE) is a company that makes those online games. Here again, we see a company with staggering growth, and a concomitant surge in the share price. On Monday, CMGE stock roared more than 8% higher in midday trading. That’s impressive considering the stock had just jumped 9% on Friday.
The big gains came one day after the company reported impressive Q1 revenue growth of 488.2%, up to $34.5 million. That metric easily bested expectations for a top line of $30.2 million. On the net income front, CMGE earned $5.6 million in Q1, a big move over the $3.46 million net loss in the same quarter last year. The positive reaction in the shares over the past two trading sessions represents a reversal of sorts for CMGE stock, as traders had driven the value of the shares down more than 40% in the three months prior.
If you are looking for a true mobile e-commerce China play, then there is perhaps none better than Tencent Holdings (TCEHY). The online and mobile software services firm’s chat platforms are extremely popular in China, and the company is reaping a whirlwind of financial benefits as a result. Wall Street knows this too, as evidenced by a recent Wall Street Journal Heard on the Street column featuring Tencent and its ability to, “mint money from mobile.”
As the WSJ points out, the company’s QQ Mobile messaging apps were big drivers of its revenue in Q1. In fact, revenue from mobile games was up about 300% to 1.8 billion yuan (or approx. $288.9 million), which easily bested expectations for a top-line of around 800 million yuan.
Tencent recently split its stock five-for-one. Adjusting for the split, TCEHY shares are up 13.6% in 2014, and the stock has vaulted some 82% during the past 12 months. If the China mobile e-commerce business continues to grow as it has recently, then you can bet that TCEHY stock is likely to spring higher as well.
As of this writing, Jim Woods did not hold a position in any of the aforementioned securities.
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