Tencent Holdings Ltd. (TCEHY) has launched tools to facilitate virtual shops for merchants on its WeChat messaging service in China.
The rollout of the new tool will easily allow merchants to directly add e-commerce extensions to WeChat with no external development needed. The ‘Minishop’ will provide transaction statistics, services for order management, and other information to aid merchants with their sales activities.
WeChat has over a billion users, making it the most popular messaging app in China. It is also used to facilitate transactions on numerous Chinese websites as well providing the ability to buy plane tickets or other services through its WeChat Pay feature. The launch of the Minishop further positions it as a competitor to China’s other online shopping giants, Alibaba (BABA) and JD.com (JD).
WeChat will be adding live-streaming to its social media features which include link-sharing, picture-posting, and videos. Many of these features could be utilized to extract important data for merchants to employ ad-targeting which could pull smaller businesses away from centralized platforms like JD.com or Alibaba’s Taobao.
Jacob Cooke, CEO of WPIC, an e-commerce tech and marketing firm helping foreign brands sell in China, believes the Minishop rollout can not be understated because of WeChat’s large user-base. In a July 16 interview with CNBC, he said, “Tencent broadly sits on quite a bit of both online and offline consumer data.” He added, “For instance, the platform would be able to recommend e-commerce products similar to what they see in offline purchases that consumers make via WeChat Pay.”
On June 24, Bernstein analyst David Dai cited a “more optimistic view on advertising” for Tencent. He added we don’t think the upside for (Tencent’s) core business is factored in yet.” The analyst reiterated a Buy rating on the stock and raised the price target from HK$470.00 to HK$570.
Additionally, Mizuho analyst James Lee on July 8 noted that for Tencent, Q2 tracked above expectations for key business segments. He maintains a Hold rating while raising his price target from HK$410 to HK$475.
Tencent is currently trading up 45% year-to-date with a Strong Buy analyst consensus that breaks down into 8 Buy ratings versus 1 Hold ratings and no Sell ratings. The $60.50 average price target implies 10% downside potential for the shares in the coming 12 months. (See Tencent’s stock analysis on TipRanks).