Alibaba and Tencent’s Market Challenges
Alibaba (NYSE: BABA) and Tencent (OTC: TCEHY), two of China’s largest tech companies, face significant hurdles in a cooling economy. Over the past five years, Alibaba’s stock has declined by nearly 40%, while Tencent’s has risen by only 6%. Both companies are expanding their AI ecosystems but are also under strict scrutiny from antitrust regulators, which has limited growth opportunities.
For Alibaba, significant revenue comes from its e-commerce platforms Taobao and Tmall, facing increased competition and regulatory restrictions. Analysts project Alibaba’s revenue to grow at a CAGR of 8% and earnings per share (EPS) at 11% from fiscal 2025 to fiscal 2028. Conversely, Tencent’s WeChat, with over 1.41 billion monthly active users, remains a core component of its business. Tencent’s revenue and EPS are expected to grow at a CAGR of 11% and 15%, respectively, from 2024 to 2027.
Currently, Alibaba is trading at 17 times its next year’s earnings, while Tencent is at 20 times. Despite appearing cheaper, Alibaba’s slower growth and competitive landscape raise concerns. Analysts suggest Tencent may be a more stable growth option given its entrenched position in the market.
