Goldman Sachs has highlighted top China internet stocks ahead of third-quarter earnings, focusing on sectors like gaming, cloud computing, and artificial intelligence. The bank views gaming and entertainment as more resilient than e-commerce and advertising amid soft consumer spending.
Tencent Holdings is expected to see 8% revenue growth in gaming and 19% in advertising, with a 12-month price target of HK$650. Alibaba Group's cloud growth is forecasted to accelerate to 53%, with margins improving to 12.5%. The company's adjusted EBITA is projected to rise 238% year on year to 31 billion yuan.
PDD Holdings is noted for its strong net cash position and free cash flow, with potential improvements in Temu's advertising monetization. Meituan's adjusted operating profit is expected to rise 104% year on year to 700 million yuan, driven by food-delivery unit economics and international expansion. JD.com is forecasted to see a 39% increase in group net profit to 8 billion yuan, with stronger free cash flow.
Goldman Sachs anticipates near-term earnings pressure for PDD Holdings due to higher costs and investment spending, while Meituan and JD.com offer longer-term growth opportunities through AI and international expansion.