BAT Stocks

Definition

BAT is a term used to refer to the stocks of three major companies in the Asian region, namely; Baidu Inc. (BIDU), Alibaba Group Holding Ltd. (BABA), and Tencent Holdings Ltd. (0700. Hong Kong, TCHEY). They are together known as the ‘China BAT stocks’, and they are the largest internet stocks in the Chinese market. Their American based subsidiaries are known as FAANGs which is made up of Facebook (FB), Amazon.com Inc. (AMZN), Alphabet, Netflix Inc. (NFLX), and Google (GOOG).

Understanding BATs

The BAT stocks have both been largely praised and criticized at the same time as quite a few analysts have the BAT stocks are often caught up in speculative swings. Many have yet stated that BATs are overvalued as there are other fast-rising competing internet companies who will be able to do as much as the BATs in the coming years. This is a result of the high competition rate in the Chinese market and these companies have more tendencies of dominating the domestic market. They are mostly compared against their American counterparts- FAANGS.

BATs Breakdown

As earlier stated, BAT stocks are made up of three major Chinese internet companies’ stocks.

Baidu: Baidu is the largest search engine in China and it controls about 70% of China’s total search engine revenues considering that Google is banned in China. With competitors like Sogou (Tencent) and Shenma (Alibaba) quickly catching up. Like many of its counterparts, Baidu has successfully expanded its business reach beyond search engine to providing map services (Baidu Maps), and entertainment services (Baidu videos). It also offers its own cloud services. In a nutshell, Baidu provides consumers with every information and they generate revenue on Ads, at least 8% of the company’s revenues are generated from online Ads with at least 500,000 active advertisers on the platform. As of its third-quarter report of 2019, the company reported a steady traffic growth with daily active users (DAUs) hitting 189 million “up 25% year over year.”

Alibaba: It is quite impossible to talk about the Chinese market without talking about Alibaba. Alibaba is an enormous online retail store often compared to Amazon, some people say it is the Amazon of China. Alibaba is the holding company for a lot of other subsidiaries such as e-commerce, tech, media, etc. Its e-commerce unit makes up approximately 80% of the company making it the core of the Alibaba company. It currently occupies the lead position in global bulk retail and sales as large quantity orders for almost every product can be ordered via its e-commerce platform. Its Aliexpress extension is directed at small retail buyers who seek to purchase goods is smaller quantities. It is gradually evolving into a conglomerate (a group of companies). One of its major subsidiaries is Taobao, a popular online retail store in China which has a lot of customers and a wide range of products. Its consumer-to-consumer (C2C) feature makes it similar to eBay which also features consumer-to-consumer purchases. However, Alibaba maintains a stronghold on the Chinese market. As of December, it reported a customer base of 500 million active buyers.

Over the past year, the company has grown by 56% and analyst reports showed that the company’s stocks were up by 88% over the last year. Its commerce units, Taobao and Tmall, combined generated the majority of its sales in the last quarter of 2019, this has been the case in previous years. As of May 2019, its total annual active users increased to 711 million and 824 million MAUs. However, the other subsidiaries of Alibaba Holding, digital media, entertainment, and cloud computing still face a few market challenges as other competitors dominate the market.

Tencent: Tencent is the major influencer of the Chinese tech market, blocking the way for competitors such as Alibaba to gain control of the market. It is China’s largest internet provider and well known for its social media platforms such as WeChat and QQ, and its major influence on the online gaming world. Their services primarily include their social media platform, instant messaging platform (QQ), as of December 2019, they reported a total of 963 million active users on WeChat. As of August 2017, the WeChat social media app was ranked the third global actively used social media app. It is the equivalent of WhatsApp in China, and it has gradually evolved from just being a social media app as it now includes payment options(WePay) and other day-to-day services. Tencent is also the current leader of news and entertainment sources in China. A majority of its revenues are generated from its online gaming unit which covers both online and mobile games. In 2016, at least 25% of the global mobile games were distributed by Tencent. As of the third quarter of 2019, the company reported total revenue of 13,748 million, a 21% increase over the third quarter of 2018.