As China’s biggest shopping festival of the year gets underway, analysts are starting to favor Chinese logistics companies as a way to play the online shopping trend. Their reasoning? The delivery companies are seeing package volume grow, regardless of how much consumers spend on each purchase. “Express parcel volume growth has been outperforming online [gross merchandise value] growth since 2019, driven by the continued drop in ticket size amid a consumption downgrade,” JPMorgan analysts said in an Oct. 30 report. The JPMorgan report initiated coverage of U.S.-listed ZTO Express , which the analysts said is China’s largest express parcel player with more than 20% of the market. ZTO, also listed in Hong Kong, is more profitable than competitors YTO Express Group, STO Express Co., Yunda Holding Co. and J & T Global Express Ltd., the report said. JPMorgan has a price target of $30 on ZTO’s U.S. shares, nearly 30% above where the stock closed Friday. ZTO YTD mountain ZTO Express shares in the U.S. in 2024. Alibaba and JD.com kicked off their annual Singles Day shopping promotions on Oct. 14 this year, more than a week earlier than in 2023. The festival, akin to Black Friday in the U.S., centers on Nov. 11. The e-commerce companies have stopped releasing Singles Day GMV figures in recent years as consumer spending in China has grown more restrained. At the same time, China’s internet tech giants, once scrutinized for alleged monopolistic behavior, this year sought to lower the temperature by reducing competitive barriers and allow a rival’s mobile payment system onto their platforms. China’s online shopping landscape has created a large express delivery market in which 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 players on an “AI Matrix” that tries to measure the willingness and ability to invest in artificial intelligence, along with the size and scale of the companies’ proprietary data. Of three companies that stood out, ZTO also emerged as Morgan Stanley’s top pick in China’s logistics industry. “We believe in a winner-takes-all express delivery market, ZTO will continue to benefit from its larger scale, more advanced infrastructure and devotion to tech innovation,” the Morgan Stanley analysts said. Morgan Stanley has a price target of $27.50 on ZTO shares. Analysts also see opportunities for logistics players with Chinese ties to expand globally as PDD ‘s Temu and ByteDance’s TikTok take on international markets. “TikTok Shop’s robust expansion in [Southeast Asia] should bolster J & T’s dominance in the express delivery sector,” Nomura analysts said in an Oct. 25 report, initiating coverage of Hong Kong-listed J & T Global Express . 1519-HK YTD mountain J & T Global Express Hong Kong-listed shares 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 is also executive director, CEO and chairman of J & T. J & T held a “competitive 11% market share in China” in the first half of this year — and the leading position in Southeast Asia with 27.4% of the market, the Nomura analysts said. “Given sizeable parcel volumes from the China express delivery market, the profitability improvement in the China market could become a driver of J & T’s net profit growth.” Nomura rates the stock a buy, with a price target of 7.30 Hong Kong dollars (94 cents). That’s more than 16% above where shares closed Friday. Morgan Stanley is less bullish, rating J & T equal-weight while citing competitive risks in China and potential challenges in Southeast Asia. “Cuts on overseas profitability outlook has weakened our investment thesis,” the Morgan Stanley analysts said. They have a price target of 7.40 Hong Kong dollars on J & T. —CNBC”s Michael Bloom contributed to this report.
Rohit Chopra, director of the CFPB, testifies during the Senate Banking, Housing and Urban Affairs Committee hearing titled “The Consumer Financial Protection Bureau’s Semi-Annual Report to Congress,” in the Dirksen Building on Nov. 30, 2023.
Tom Williams | Cq-roll Call, Inc. | Getty Images
The Consumer Financial Protection Bureau on Thursday issued a finalized version of a rule saying it will soon supervise nonbank firms that offer financial services likes payments and wallet apps.
Tech giants and payments firms that handle at least 50 million transactions annually will fall under the review, which is meant to ensure the newer entrants adhere to the laws that banks and credit unions abide by, the CFPB said in a release. That would include popular services from Apple and Google, as well as payment firms like PayPal and Block.
While the CFPB already had some authority over digital payment companies because of its oversight of electronic fund transfers, the new rule allows it to treat tech companies more like banks. It makes the firms subject to “proactive examinations” to ensure legal compliance, enabling it to demand records and interview employees.
“Digital payments have gone from novelty to necessity and our oversight must reflect this reality,” said CFPB Director Rohit Chopra. “The rule will help to protect consumer privacy, guard against fraud, and prevent illegal account closures.”
A year ago, the CFPB said it wanted to extend its oversight to tech and fintech companies that offer financial services but that have sidestepped more scrutiny by partnering with banks. Americans are increasingly using payment apps as de facto bank accounts, storing cash and making everyday purchases through their mobile phones.
The most popular apps covered by the rule collectively process more than 13 billion consumer payments a year, and have gained “particularly strong adoption” among low- and middle-income users, the CFPB said on Thursday.
“What began as a convenient alternative to cash has evolved into a critical financial tool, processing over a trillion dollars in payments between consumers and their friends, families, and businesses,” the regulator said.
The initial proposal would’ve subjected companies that process at least 5 million transactions annually to some of the same examinations that the CFPB conducts on banks and credit unions. That threshold got raised to 50 million transactions in the final rule, the agency said Thursday.
Payment apps that only work at a particular retailer, like Starbucks, are excluded from the rule.
The new CFPB rule is one of the rare instances where the U.S. banking industry publicly supported the regulator’s actions; banks have long felt that tech firms making inroads in financial services ought to be more scrutinized.
The CFPB said the rule will take effect 30 days after its publication in the Federal Register.
Check out the companies making headlines before the bell. Snowflake – Shares surged more than 21% following the company’s better-than-expected third-quarter results and strong guidance. Snowflake posted adjusted earnings of 20 cents per share on revenue of $942 million. Analysts surveyed by LSEG were looking for 15 cents in earnings per share on revenue of $897 million. Palo Alto Networks – The cybersecurity stock fell 2% after the company issued fiscal second-quarter guidance largely in-line with expectations. Palo Alto Networks guided for adjusted earnings of $1.54 to $1.56 per share on revenue of $2.22 billion to $2.25 billion. That was roughly in line with the Street’s forecast of $1.55 per share in earnings and $2.23 billion in revenue, per FactSet. Palo Alto also announced a 2-for-1 stock split. Nvidia – Shares of the chipmaker fell around 1% despite its third-quarter earnings results topping Wall Street’s expectations . The company posted 81 cents in adjusted earnings per share on revenue of $35.08 billion, while analysts had penciled in 75 cents in earnings per share on revenue of $33.16 billion, according to LSEG. Crypto-related stocks – Stocks tied to bitcoin moved higher after the price of the cryptocurrency hit $98,000 for the first time . MicroStrategy soared about 11%, while Coinbase jumped nearly 4%. Others linked to the cryptocurrency like miner Mara Holdings and financial services platform Robinhood also saw gains, rising almost 10% and more than 3%, respectively. Baidu – U.S. shares of the Chinese search engine fell more than 1% after the company’s third-quarter revenue declined by 3% compared to the year-ago period . That said, Baidu posted a 12% increase in its non-online marketing revenue, which was mainly driven by its artificial intelligence cloud business. BJ’s Wholesale Club – The stock popped nearly 8% after the warehouse club reported a third-quarter earnings beat and raised its full-year guidance. BJ’s also announced a plan to repurchase $1 billion shares and said it will raise its membership fee. Merus – Shares gained 2.5% after Goldman Sachs initiated coverage of the cancer therapeutics company with a buy rating, saying it sees big gains ahead on the back of Merus’ cancer treatment. — CNBC’s Sarah Min, Hakyung Kim and Michelle Fox Theobald contributed reporting.
Baidu on Nov. 12, 2024, unveiled a pair of glasses with a built-in AI assistant, putting up a Chinese rival to the Meta Ray-Bans that have proven a rare success in AI-powered hardware.
Bloomberg | Bloomberg | Getty Images
BEIJING — Chinese tech giant Baidu on Thursday posted a 3% annual drop in third-quarter revenue, nevertheless beating market expectations amid AI cloud growth.
The revenue print came in at $4.78 billion for the quarter ending on Sept. 30. Net income for the period rose by 14% to $1.09 billion.
Baidu noted a 12% surge in its non-online marketing revenue to the equivalent of $1.1 billion, mainly driven by its artificial intelligence cloud business.
Here’s what analysts expected the company to report for the quarter, according to LSEG estimates:
Revenue: $4.63 billion
Net income: $857.17 million
Baidu had reported revenue of 34.45 billion yuan ($4.75 billion) and net income of 6.68 billion yuan for the third quarter of 2023.
Beijing-based Baidu operates one of the major web browser search engines in China, along with a frequently used maps app. The company also sells cloud computing services. Online marketing drives a significant portion of the firm’s revenue.
In artificial intelligence, Baidu has promoted its Ernie chatbot as a local alternative to OpenAI’s ChatGPT, which isn’t available in China. Ernie bot now has 430 million users, Baidu said last week.
The company this month also announced that its Xiaodu AI Glasses will begin sales in the first half of next year. The wearable has at least one camera and uses Ernie’s AI capabilities and Baidu’s maps and search functions. While Baidu hasn’t revealed a price, the product is widely expected to be a Chinese alternative to Meta’s popular Ray-Ban smart glasses.
Baidu announced a management rotation last month, with Junjie He, formerly head of the mobile ecosystem group, becoming the company’s interim Chief Financial Officer, while former CFO Rong Luo assumed leadership of the mobile division.