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<Research>JPM: CN Internet Stocks Undergo Re-rating; 4 Major Misjudgments in TENCENT's Mkt Valuation
In the six weeks since the conclusion of the 4Q25 earnings season, Chinese internet stocks have undergone a re-rating, which differentiated itself from the AI narrative-driven rall...
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<Research>JPM: CN Internet Stocks Undergo Re-rating; 4 Major Misjudgments in TENCENT's Mkt Valuation
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In the six weeks since the conclusion of the 4Q25 earnings season, Chinese internet stocks have undergone a re-rating, which differentiated itself from the AI narrative-driven rally seen in January 2026, JPMorgan wrote in its research report.

Earnings revisions have now become the dominant factor driving share price performance, with AI capital expenditure being penalized rather than rewarded. Buy-side institutions have broadly adopted a framework of "true P/E ratio plus earnings floor plus expired catalysts" to determine position sizing.

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Under this market environment, JPMorgan has updated its sector view and named TENCENT (00700.HK)  -1.800 (-0.363%)    Short selling $1.48B; Ratio 16.230%   as its top pick. Other sector top picks include JD-SW (09618.HK)  -0.200 (-0.168%)    Short selling $239.19M; Ratio 35.573%   , TRIP.COM-S (09961.HK)  -1.000 (-0.241%)    Short selling $109.40M; Ratio 18.355%   , BIDU-SW (09888.HK)  +0.900 (+0.747%)    Short selling $477.94M; Ratio 42.915%   , BABA-W (09988.HK)  +1.400 (+1.074%)    Short selling $1.39B; Ratio 16.756%   , and BILIBILI-W (09626.HK)  -3.200 (-1.802%)    Short selling $108.01M; Ratio 24.737%   .

In JPMorgan's opinion, there are four major misjudgments in the market's valuation of TENCENT. Its earnings floor is real, and its free cash flow of RMB182.6 billion in FY25 is more than sufficient to support its current AI investment framework. The broker's forecast of around 8% EPS growth for 2026 has already factored in a higher level of expenditure. Compared with the consensus framework, TENCENT's AI monetization execution is also beating market expectations.

Meanwhile, JPMorgan considers TENCENT's gaming and licensing businesses to have an underestimated moat, as licensing resources rather than model quality are the scarce assets in China. WeChat also possesses long-term potential value that is barely reflected in the current price-to-earnings ratio.

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The broker has kept a constructive stance on JD-SW and TRIP.COM-S but will be more selective. Its rating for MEITUAN-W (03690.HK)  -0.650 (-0.782%)    Short selling $990.17M; Ratio 33.280%   remains Neutral.
(HK stocks quote is delayed for at least 15 mins.Short Selling Data as at 2026-04-24 16:25.)

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