With China's biggest shopping festival of the year underway, analysts have begun to favor Chinese logistics companies as a way to play the online shopping trend. Their logic? Delivery companies are seeing growth in package volume, regardless of how much consumers spend on each purchase. “Express parcel volume growth has outpaced online (gross merchandise value) growth since 2019, driven by a continued decline in ticket volume amid lower consumption,” JPMorgan analysts said in an October 30 report. JPMorgan's report initiated coverage of US-listed ZTO Express, which analysts said is China's largest express parcel operator with more than 20% of the market. ZTO, also listed in Hong Kong, is more profitable than rivals YTO Express Group and STO Express Co., the report said. And Yunda Holding Co., Ltd. and J&T Global Express Ltd. JPMorgan has a $30 price target for ZTO US shares, nearly 30% above the stock's closing price on Friday. ZTO YTD Mountain ZTO Express shares in the United States in 2024. Alibaba and JD.com began their annual Singles' Day shopping promotions on October 14 this year, more than a week before 2023. The festival, which is similar to Black Friday in the United States , focused on November 11. E-commerce companies have stopped releasing GMV numbers for Singles' Day in recent years as consumer spending in China has become more restricted. Meanwhile, China's Internet technology giants, once under scrutiny for alleged monopolistic behavior, this year sought to lower the temperature by lowering competitive barriers and allowing a competitor's mobile payment system onto their platforms. China's online shopping scene has created a large express delivery market where logistics companies that use technology well can benefit from economies of scale, Morgan Stanley analysts said in a report last month. The Morgan Stanley study ranked Chinese logistics companies on an “AI matrix” that attempts to measure the willingness and ability to invest in AI, along with the size and volume of companies’ data. Among the three companies that stood out, ZTO also emerged as Morgan Stanley's top pick in China's logistics industry. “We believe in a winner-take-all express delivery market, and ZTO will continue to benefit from its larger, more advanced infrastructure and dedication to technological innovation,” Morgan Stanley analysts said. Morgan Stanley has a $27.50 price target for ZTO shares. Analysts also see opportunities for logistics players with ties to China to expand globally as PDD's Temu and ByteDance's TikTok enter international markets. “TikTok Shop’s aggressive expansion into (Southeast Asia) would strengthen J&T’s dominance in the express delivery segment,” Nomura analysts said in a report dated October 25, at the start of coverage of Hong Kong-listed J&T Global Express. 1519-HK YTD J&T Global Express shares are listed in Hong Kong in 2024. The company was founded in Southeast Asia by Jet Li, who previously oversaw business in the region for Chinese smartphone company Oppo. Li also serves as Executive Director, CEO and Chairman of J&T. J&T captured a “competitive 11% market share in China” in the first half of this year – and a leading position in Southeast Asia with a 27.4% share From the market. Nomura analysts said. “Given the large parcel volume of China's express delivery market, improved profitability in the Chinese market could become a driver of J&T's bottom line growth.” Nomura rates the stock a buy, with a target price of HK$7.30 (94 cents). That's 16% higher than where shares closed on Friday. Morgan Stanley is less optimistic, rating J&T on par while citing competitive risks in China and potential challenges in Southeast Asia. “Reductions in profitability forecasts abroad weakened our investment thesis,” Morgan Stanley analysts said. They have a price target of HK$7.40 on J&T. — CNBC's Michael Bloom contributed to this report.
Trending
- Stocks to play China's shopping festival, even if consumers spend less
- Nearly 100 S&P 500 names set to report, including 3 AI plays
- Taiwanese reports increasing Chinese military activity as US elections approach
- Elections remember jumping on company conference calls as November 5 approaches
- Warren Buffett sells his shares. Here are his top 5 collectibles
- Berkshire Hathaway's cash fortress exceeds $300 billion as Buffett sells more shares and freezes buybacks
- How Disney flips its parks between Halloween and winter break
- Google Cloud beats AWS and Azure in Q3 as AI battle heats up
Stocks to play China's shopping festival, even if consumers spend less
