U.S. Adds ByteDance Unit, Drops Tencent's WeChat From 'Notorious Markets' List

The e-commerce giants are increasingly solidifying their dominance in the global retail market. With the proliferation of digital shopping platforms, these companies are leveraging advanced technology, logistics networks, and competitive pricing strategies to capture a significant share of the retail pie.

Given the industry’s robust prospects, investors may want to explore leading e-commerce stocks, including Amazon.com, Inc. , Alibaba Group Holding Limited , and Sea Limited , for potential gain and growth.

The companies are spearheading technological advancements in e-commerce, including artificial intelligence, machine learning, and big data analytics. Advances in AI and machine learning have enabled deep personalization techniques to customize content by user, which also increases customer retention, leading to an efficient sales process. Also, innovations like voice-activated shopping assistants and augmented reality fitting rooms are setting new benchmarks in the online retail space.

According to the Census Bureau of the Department of Commerce reports, in the third quarter of 2024, retail e-commerce sales were $300.1 billion, indicating an increase of 7.4% year-over-year. Further, the expected global e-commerce growth for the fourth quarter of 2024 is $3.64 trillion.

The global e-commerce market is anticipated to reach $83.26 trillion by 2030, exhibiting a CAGR of 18.9%. Considering these conducive trends, let’s examine the fundamentals of the three above-mentioned e-commerce stocks.

Amazon.com, Inc. (AMZN)

AMZN is a global giant in the retail sector, offering consumer products, advertising, and subscription services through online and physical stores across North America and international markets. The company has a market cap of $1.76 trillion and operates through three segments: North America; International; and Amazon Web Services (AWS).

On December 9, AMZN and Intuit Inc. announced a multi-year partnership to empower millions of Amazon sellers with Intuit’s AI-driven platform, offering financial management tools, compliance support, and capital access. Intuit’s AI-driven expert platform will allow AMZN’s sellers to discover and access Intuit’s platform seamlessly, benefiting from powerful financial insights.

AMZN's trailing-12-month ROCE and ROTA of 22.56% and 8.53% are 107.3% and 119.6% higher than their respective industry averages of 10.88% and 3.88%. Likewise, its trailing-12-month asset turnover ratio of 1.16x is 17.8% above the industry average of 0.98x.

For the third quarter of 2024, which ended on September 30, AMZN's total net sales increased 11% year-over-year to $158.88 billion, while the operating income stood at $17.41 billion, up 55.6% year-over-year. Its net income amounted to $15.33 billion, representing an increase of 55.2% from the last year’s period. Also, the company’s EPS for the quarter increased 52.1% year-over-year to $1.43.

Analysts expect AMZN’s revenue for the fourth quarter (ended December 2024) to increase 10.2% year-over-year to $187.27 billion, while its EPS for the same quarter is expected to grow 47.8% from the prior year to $1.48. Moreover, the company has surpassed Street EPS estimates in each of the trailing four quarters.

Over the past year, the stock has gained 52.9%, closing the last trading session at $222.11.

AMZN’s POWR Ratings reflect this robust outlook. The stock has an overall rating of B, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

AMZN has an A grade for Sentiment and a B for Growth, Momentum, and Quality. It is ranked #16 out of 50 stocks in the A-rated Internet industry. Click here to see the additional ratings for AMZN (Value and Stability).

Alibaba Group Holding Limited (BABA)

Based in Hangzhou, China, BABA provides technology infrastructure and marketing platforms to help merchants, brands, retailers, and other businesses to engage with their users and customers globally. The company operates through seven segments: China Commerce; International Commerce; Local Consumer Services; Cainiao; Cloud; Digital Media and Entertainment; and Innovation Initiatives and Others.

On December 5, 2024, BABA launched Pic Copilot, an advanced AI-driven e-commerce design tool in the United States tailored for SMEs to save photography and design costs while boosting sales. This launch features advanced tools like virtual try-ons, generating significant savings and enhanced marketing performance during its successful Black Friday trial.

The stock’s trailing-12-month net income margin of 8.98% is 105.36% higher than the industry average of 4.37%. Similarly, its 8.75% trailing-12-month levered FCF margin is 93.6% above the industry average of 4.52%. Also, its trailing-12-month ROTA of 4.90% compares favorably to the industry average of 3.88%.

In the fiscal second quarter that ended on September 30, 2024, BABA’s consolidated revenue increased 5.2% year-over-year to $33.70 billion. The company reported income from operations of $5.02 billion, indicating a 4.9% growth from the prior-year quarter. Its net income came in at $6.21 billion, up 63.1% year-over-year, while its earnings per ADS grew 68.7% from the prior-year quarter to $2.59.

Street expects BABA’s revenue for the fiscal third quarter (ended December 2024) to increase 5.2% year-over-year to $38.05 billion. Its EPS for the same period is expected to register a 3.6% growth from the prior year, settling at $2.73.

BABA’s shares have surged 17.9% over the past nine months and 15.7% over the past year to close the last trading session at $84.48.

BABA’s POWR Ratings reflect its positive outlook. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system.

It also has a B grade for Growth, Momentum, Sentiment, and Quality. In the 43-stock A-rated China industry, it is ranked #9. To see BABA’s Value and Stability ratings, click here.

Sea Limited (SE)

Headquartered in Singapore, SE engages internationally in digital entertainment, e-commerce, and digital financial service businesses. The company provides a Garena digital entertainment platform to access online games, eSports operations, and other entertainment content, as well as a Shopee e-commerce platform for integrated payment and logistics infrastructure and seller services.

In terms of the trailing-12-month levered FCF margin, SE’s 11.08% is 25.1% higher than the 8.86% industry average. Similarly, its 0.78x trailing-12-month asset turnover ratio is 58.2% higher than the industry average of 0.49x.

During the fiscal third quarter that ended on September 30, 2024, SE’s revenue increased 30.8% year-over-year, amounting to $4.33 billion. Its gross profit amounted to $82.89 million, increasing 29.1% year-over-year. Its operating income came in at $202.42 million compared to the year-ago net loss of $127.74 million.

In addition, the company’s net income stood at $153.32 million compared to the prior-year quarter’s loss of $143.98 million, while its EPS came in at $0.24 versus a loss of $0.26 per share last year. Also, the total adjusted EBITDA rose significantly from the prior year’s quarter to $521.34 million.

The consensus revenue estimate of $4.60 billion for the fiscal fourth quarter (ended December 2024) represents a 27.3% increase year-over-year. The consensus EPS estimate of $0.70 for the ongoing quarter indicates a significant improvement year-over-year. The company has an excellent earnings surprise history; it surpassed the consensus revenue estimates in each of the trailing four quarters.

The stock has gained 180.7% over the past year and 92.5% over the past nine months to close the last trading session at $106.42.

SE’s bright prospects are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.

It also has an A grade for Growth and a B for Momentum, Sentiment, and Quality. Within the A-rated Internet industry, it is ranked #21 out of 50 stocks. Click here to see SE’s ratings for Value and Stability.

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AMZN shares were trading at $222.88 per share on Wednesday afternoon, up $0.77 (+0.35%). Year-to-date, AMZN has gained 1.59%, versus a 0.44% rise in the benchmark S&P 500 index during the same period.

Nvidia stock hit a new record high on Jan. 7 of $153.13 during intraday trading but eventually closed down over 6.2% as CEO Jensen Huang outlined the company’s artificial intelligence (AI) endeavors in his keynote speech at CES 2025. As we have seen with Nvidia for some time, the event turned out to be a typical “sell the news” event. As has usually been the case with Nvidia, markets start to price in events before they happen, so the actual event fails to enthuse investors unless it offers something really exciting. Simply put, “great, not good" is what markets expect from Nvidia after its breathtaking rally.

While ChatGPT and U.S. tech heavyweights such as Nvidia , Microsoft , and Meta Platforms have dominated the artificial intelligence (AI) conversation, a sleeping giant in China has been quietly building its AI empire. Baidu , often called the “Google of China,” is positioning itself as a major player in the artificial intelligence revolution. With its ERNIE Bot already serving over 230 million users and its autonomous driving platform Apollo making significant strides, Baidu’s transformation from a search engine company to an AI powerhouse continues to gain momentum.

As we begin 2025, Baidu looks uniquely positioned to capitalize on a rapidly expanding addressable market. So, let’s see if you should invest in the AI stock right now.

Baidu Is Poised for Explosive Growth

In an employee letter marking Baidu’s 25th anniversary, company CEO Robin Li stated he envisions “explosive growth” in AI applications for 2025. According to a TipRanks article, the Chinese tech giant is showing promising signs, with its AI-powered platform Baidu Wenku attracting over 40 million paying users and 70 million monthly active users.

Moreover, website traffic on this platform surged 272.4% year-over-year in 2024, validating its AI-focused strategy. Notably, Baidu invests over 20% of its revenue in R&D to maintain a technological edge over its peers.

While Baidu’s AI ambitions are exciting, let’s dive into the numbers to see if they support the “explosive growth” narrative.

A Strong Performance in Q3 2024

In the third quarter, Baidu Core (its main business segment) reported sales of $3.78 billion, which stayed relatively flat year-over-year. Moreover, AI Cloud revenue touched $686 million, up 11% compared to the year-ago period. AI-related sales now account for 11% of total cloud sales, up from 9% in Q2.

Baidu claimed that the ERNIE platform currently handles 1.5 billion API calls daily, up from 600 million in August. It also stated that over 20% of search results contain AI-generated content, and 70% of the Baidu App’s monthly users engage with generative AI content.

Baidu's AI transformation is showing promising signs. For instance, its document platform, Wenku, saw subscription revenue grow 23% year-over-year, and AI-enabled features reached 50 million monthly active users — a 300% jump. More impressive is that about 20,000 advertisers generate daily ad spending through ERNIE agents.

Alternatively, online marketing revenue declined 4% year-over-year to $2.89 billion, reflecting China's challenging macroeconomic environment. Its core business still represents the majority of sales, so any continued weakness could offset AI-powered gains.

Baidu’s financials paint a picture of a company investing heavily in AI while maintaining profitability. It reported operating income of $844 million, indicating a margin of 25%. With a free cash flow of $376 million, Baidu ended Q3 with a cash position of over $20 billion.

What is the Target Price for the AI Stock?

Analysts tracking Baidu stock expect its sales to rise from $18 billion in 2024 to $20.5 billion in 2026. Moreover, adjusted earnings are forecast to expand from $10 per share in 2024 to $11.3 per share in 2026. So, priced at just 7x forward earnings, BIDU is an AI stock trading at a cheap multiple.

Valued at a market cap of $29.2 billion, Baidu has delivered outsized gains to long-term shareholders. The AI stock went public in 2005 and has since returned close to 600%. However, it also trades 75% below all-time highs, allowing you to buy the dip.

Out of the 17 analysts covering BIDU stock, 10 recommend “Strong Buy” and seven recommend “Hold.” The average target price for Baidu stock is $113.28, indicating upside potential of over 30% from current levels.

By Brian Swint

The Department of Defense updated its list of companies working with the Chinese military on Monday. Technology company Tencent and a Tesla battery supplier were on it.

The DOD has published its list of so-called Chinese military companies annually since 2021 as part of its "effort in highlighting and countering the PRC's Military-Civil Fusion strategy." According to the DOD, the list "serves to begin identifying, among other things, Military-Civil Fusion contributors operating directly or indirectly in the United States." While the list does not initiate any action against the 153 Chinese firms included, it does discourage other companies from doing business with them.

The world's biggest supplier of batteries for electric vehicles also made the list: Shares of Contemporary Amperex Technology, better known as CATL, fell more than 2% in Chinese trading. CATL put out a statement saying that it has never engaged in military activity and that the designation was an error.

Tencent, which runs social media and ecommerce platforms, said its inclusion on the list "is clearly a mistake." Its American depositary receipts traded down 0.7% when the market opened. In Hong Kong, the shares dropped more than 7%.

Huawei, the tech firm that has long been under U.S. scrutiny, and state oil company CNOOC were also included on the list.

Write to Brian Swint at brian.swint@barrons.com

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