Frost On Top of Snow → China Call Today

Are you wondering how exposed the e-commerce companies are to the virus?  Are you curious about what those stay-at-home people are doing and thinking about?  Are you thinking about how this may affect the 'sinking market' opportunity and/or how social e-commerce trends may change?  If so, join us for a deep dive TODAY at 2pm ET, as Hedgeye China tries to answer these questions and more...

WHY IT MATTERS

It was mostly smooth sailing e-commerce before the number of the novel coronavirus cases exploded on January 19th.  With virus worries and travel/logistics disruptions persisting, it's time to evaluate how potential changes in consumer spending behavior can affect the e-commerce giants.

Furthermore, the e-commerce battlefield is more competitive than ever with the Big 3 (BABA, JD, PDD) duking it out.  The focus is on the sinking market (lower-tier cities) but is it the golden opportunity?  We have one chart that may raise some eyebrows.  Armed with enormous firepower, Alibaba always squashes its e-commerce competition but we think this time it could be different given they don't have home court advantage.  In addition, we would argue its mindset is more defensive-minded, despite its push into lower-tier cities.

We believe the bear thesis is getting stronger for Alibaba (BABA) and the bull thesis could firm up for the controversial Pinduoduo (PDD).  We will lay out our working paper thoughts and explain why we're not pulling the trigger on both names until after a couple of near-term catalysts have passed.

HOW WE'RE DIFFERENT

For those of you unfamiliar with our research process, we're very data-dependent and strongly believe in the importance of getting an edge.  We use a unique set of big-data quantitative tools (in-house & with 3rd party platforms) to try to map out what's happening real-time.  For example, we constantly draw conclusions from my Hedgeye Proprietary China Algo which is a multi-factor, multi-duration model that measures user engagement metrics.  

As it pertains to e-commerce, we will announce a new proprietary dataset that details monthly sales volume (in RMB) across multiple categories as a gauge for GMV for the major e-commerce platforms.  It utilizes a complex, computer algorithm and is currently in beta mode.  Other data products include CTR (click-through rate) and conversion rates for the top Taobao/Tmall stores and a tracker for livestreamers on Taobao and Douyin (owned by Bytedance).

key deep dive topics (~100 slides)

• Coronavirus- winners/unfortunate ones and potential financial impact
• Social e-commerce explosion - different methods to attract and monetize users
  • Spend money to make money - 10bn subsidy war (PDD, Jingxi (JD), Juhuasuan (BABA))
  • Rise of KOCs
• Price vs quality vs convenience 
• Sinking market - what's the true high growth TAM and clarifying some misconceptions 
• How top e-commerce platforms compare with the smaller competitors
• Why livestreaming e-commerce makes sense 
• "One out of two"
• January metrics & Q4 earnings preview