Alibaba’s market capitalization is only half that of Tencent as recovery lags

(Bloomberg) — Alibaba Group Holding Ltd’s market value has fallen to about half that of rival Tencent Holdings Ltd as the former’s e-commerce-focused business faces weak demand and increased competition.

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Alibaba, whose other major businesses include cloud computing, has a market value of $201 billion, while Tencent, which focuses on social media and gaming, has a market value of $391 billion, according to data compiled by Bloomberg. Alibaba shares currently trade at about eight times the expected trading price. P/E ratio, while Tencent’s is 16 times.

Alibaba abruptly ended plans to spin off its cloud unit on Thursday, citing tight U.S. restrictions on chip sales from China. The news, coupled with lower-than-expected domestic e-commerce sales, caused the stock to plunge about 10% in Hong Kong, its biggest drop this year.

The difference in market value between the two companies also highlights some of the regulatory and macroeconomic issues plaguing Alibaba. China has sought to rein in the country’s tech giants in recent years, with regulators investigating Alibaba subsidiary Ant Group Ltd and imposing enforcement measures against Alibaba. A $1 billion fine was imposed on fintech companies backed by Jack Ma. Before the crackdown began at the end of 2020, its market value was already significantly higher than that of Tencent.

Tencent reported earlier this week that third-quarter profitability across its major business lines was better than expected. The Chinese social media operator saw growth across its divisions from gaming to advertising to fintech, driving revenue up 10%.

Willer Chen, senior analyst at Forsyth Barr Asia Ltd, said: “China’s consumption recovery is tepid and competition in the e-commerce field is fierce, all of which make Alibaba’s business environment more difficult.” Impact investor sentiment. “

(An earlier version corrected date in third paragraph to Thursday)

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