EasyResearch: Temu, Takealot, Wish, AliExpress, and Amazon - Are You Investing?

In today's dynamic marketplace, e-commerce has revolutionised the way we shop, presenting lucrative opportunities for investors. Platforms like Temu, Takealot, Alibaba (AliExpress), Wish, and Amazon have emerged as leading players in this digital realm, offering investors exciting prospects for growth and diversification.

In this article, we'll be exploring the companies that own these giant e-commerce platforms and how they've performed in their most recent results!

Alibaba (AliExpress)

Alibaba Group, a large Chinese tech company that focuses on e-commerce, retail, internet services, and technology in general, helps businesses connect with each other and improve their operations through technology. AliExpress, owned by Alibaba Group, is an online retail service comprising small businesses from China and other locations, like Singapore, offering products to international online buyers. Consumption, Cloud and Globalization are the three strategic areas for Alibaba. 

For the quarter that ended in December 2023, Alibaba Group saw its revenue climb by 5% year-over-year to RMB260.35 billion (US$36.67 billion). However, income from operations took a significant hit, dropping by 36% to RMB22.51 billion (US$3.17 billion), primarily due to impairment charges on intangible assets and goodwill. Net cash from operating activities also saw a decline of 26% to RMB64.72 billion (US$9.12 billion) compared to the same quarter in 2022.

According to the Chief Financial Officer of Alibaba Group, the company delivered a healthy quarter with revenue growth of 5% year-over-year. "We increased our investment in strategic priorities and improved shareholder return by leveraging our strong balance sheet and cash flow," they stated.

Being based in China, Alibaba may face regulatory challenges imposed by the Chinese government, such as antitrust/anti-monopoly measures or data privacy regulations. These could affect its operations, expansion, and financial performance, potentially impacting shareholder value in the medium to long term. It's also worth adding that Alibaba is in the process of splitting into six divisions whereby each division will have its own CEO and board of directors.

Temu

PDD Holdings is a global commerce group fostering digital inclusion and growth. Through its diverse portfolio of businesses, PDD aims to enhance local economies and empower small businesses by expanding digital opportunities. Leveraging robust sourcing, logistics, and fulfilment networks, the company is the pioneer behind Temu, one of the new kids on the block in South Africa!

According to the Chinese media outlet Jiemian, Temu started selling its budget-friendly products in South Africa in January, an expansion that marks Africa as the sixth continent reached by the Pinduoduo sibling app in less than a year and a half.

For the third quarter, which ended in November 2023, PDD Holdings' total revenues surged to RMB68,840.4 million (US$19,435.4 million), marking a 94% increase from RMB35,504.3 million in Q3 2022. Operating profit also rose, reaching RMB16,656.0 million (US$2,282.9 million), a 60% increase from RMB10,436.6 million in the same quarter of 2022. Net cash generated from operating activities soared to RMB32,537.9 million (US$4,459.7 million), compared to RMB11,651.8 million in the same quarter of 2022, driven by increased net income and changes in working capital.

As Temu expands into new markets like South Africa and other African countries, it will have to navigate local regulations and consumer preferences, which could affect its growth trajectory and shareholder returns.

Wish

Wish is one of the largest online shopping platforms, and they offer a wide variety of products at very low prices. Wish itself doesn't sell the products but instead connects buyers with merchants around the world. The platform is owned by ContextLogic Inc., which was founded in the US, specifically in San Francisco.

In the most recent developments, ContextLogic Inc., operating as Wish, announced earlier this year that it will sell most of its assets, including the Wish e-commerce platform, to Qoo10 for around $173 million in cash. This deal, subject to adjustments, represents about $6.50 per share and a 44% premium to ContextLogic's stock price on February 9, 2024. After the sale, ContextLogic will have minimal expenses, no debt, and around $2.7 billion in net cash from the transaction, along with other assets.

In terms of revenues, there was a notable decline, with a decrease of 57% year over year to $53 million. Core Marketplace revenues saw a downturn of 58% year over year, amounting to $15 million, while Product Boost revenues dropped by 50% year over year to $5 million. Additionally, Logistics revenues experienced a decrease of 57% year over year, totaling $33 million.

The company plans to use these proceeds to leverage its Net Operating Loss carryforwards and explore options with financial sponsors to maximize the value of its tax assets. The transaction, expected to finalize in the second quarter of 2024, awaits shareholder approval and standard closing conditions. Following the deal's closure, ContextLogic will trade under a new ticker symbol within 30 days.

Takealot

Naspers is a powerhouse in the consumer internet realm, operating globally and has a significant presence in technology investment. With over two billion customers worldwide, in South Africa its tech-driven initiatives include Media24, Takealot, and Mr D.

For the six months that ended in September 2023, Naspers saw significant developments. Group revenue from continuing operations surged by US$248 million to US$3 billion, propelled by robust growth in Classifieds, Food Delivery, and Payments/Fintech. This growth led to a reduction in trading losses to US$124 million, primarily within the E-commerce sector. However, operating losses increased to US$426 million, attributed to an impairment loss on Edtech investments and a goodwill impairment of US$440 million.

On a positive note, equity-accounted profits rose by US$93 million to US$1.2 billion, driven by strong performance in the Food Delivery segment. Additionally, OLX Autos was slated for exit in March 2023. Core headline earnings from continuing operations reached US$0.9 billion, marking a substantial 90% (112%) increase.

With Naspers, while experiencing significant revenue growth, regulatory challenges and impairments on investments can impact shareholder returns. In addition, the rise of foreign-owned e-commerce could increase competition for Takealot and push suppliers and small businesses to explore ways to sell their products on alternative platforms.

Amazon

Amazon is renowned for its e-commerce marketplace, where you can purchase nearly anything. Additionally, they provide cloud computing services through Amazon Web Services, utilised by numerous businesses. Amazon has also diversified into various sectors, including streaming entertainment with Prime Video, smart speakers with Echo, and even ownership of grocery stores like Whole Foods. The e-commerce giant announced last year that it is set to launch its dedicated online shopping service, Amazon.co.za, in South Africa in 2024.

Looking at where it is financially, its Q4 net sales rose 14% to $170.0 billion. Excluding FX impacts, sales increased 13%. North America segment sales grew 13% to $105.5 billion, while international segment sales rose 17% to $40.2 billion (13% excluding FX). AWS segment sales increased 13% to $24.2 billion. Operating income surged to $13.2 billion. North American segment operating income was $6.5 billion, the international segment operating loss narrowed to $0.4 billion, and the AWS segment operating income reached $7.2 billion. Net income was $10.6 billion, or $1.00 per diluted share. Notably, Q4 2023 net income includes a pre-tax valuation loss of $0.1 billion from the Rivian Automotive, Inc. investment, compared to a $2.3 billion loss in Q4 2022.

According to Amazon's CEO, the Q4 marked a record-breaking Holiday shopping season, concluding a strong 2023 for Amazon. “While we achieved significant progress in revenue, operating income, and free cash flow, what we're most pleased with is the ongoing innovation and enhancements to customer experience across our businesses,” the CEO added.

Conclusion

By becoming a shareholder in these innovative enterprises, investors can participate in the thriving e-commerce landscape and potentially reap significant returns. While e-commerce presents vast investment opportunities, investors must consider the diverse factors influencing each company's performance, including regulatory environments, competitive landscapes, and strategic initiatives. In navigating this dynamic market, a nuanced approach to investment is essential for long-term success.

Note that the Chinese Yuan (CNY) and Renminbi (RMB) are interchangeable terms for China's currency.