- Mizuho analyst James Lee expects the recovery curve in 2H22 to slow for China Internet, given the rising COVID cases and mobility restrictions impacting consumer sentiment and business activities.
- The headwind would reflect across all internet segments, including e-commerce, advertising, and cloud computing.
- Although the economy should recover from the 2Q22 trough, a potential moderation to the Zero-COVID policy would improve the speed of recovery and investor sentiment.
- With the conclusion of the 20th National Congress, Lee expects a focus on consumption support for strategic industries with a gradual exit from Zero-COVID.
- Lee maintained JD.com, Inc (NASDAQ: JD) and Baidu, Inc (NASDAQ: BIDU) as top picks. Lee anticipated both companies to be market-share gainers from regulatory policies and the competitive environment.
- Lee maintained Buy on Baidu cutting the price target from $275 to $200.
- Lee reiterated Buy on JD.com, slashing the price target from $90 to $82.
- The price target cuts reflected macro headwinds and compression of group multiples.
- Price Action: JD shares traded higher by 3.96% at $50.87 on the last check Monday. BIDU shares traded higher by 3.21% at $92.33.
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