Kuaishou Earnings: Platform Should See Continued Strength in E-Commerce and Advertising Into 2024
We maintain our fair value estimate of HKD 70 for Kuaishou after the company reported third-quarter revenue of CNY 27.9 billion, reflecting a 21% increase year on year that was 1% better than consensus. Revenue growth this quarter was driven by strength in advertising revenue, which increased 27% year on year, and continued momentum in livestreaming e-commerce, which saw a 30% year-on-year increase in gross merchandise volume, or GMV. Combined with lowered sales and marketing expenses, operating margins expanded by 1,000 basis points year on year and 160 points sequentially to 5.9%. This was encouraging, after heavy losses in 2022, and should remain at a mid-single-digit level in the fourth quarter. Kuaishou guided to a 15% year-on-year revenue increase for the fourth quarter, driven by 20% and 40% year-on-year revenue growth for its online marketing and livestreaming e-commerce businesses, respectively. While Kuaishou did not provide visibility into 2024, we believe that revenue should continue to see robust growth, given its encouraging fourth-quarter guidance. Our outlook remains positive for Kuaishou as it still has growth catalysts, including increasing its comparatively low e-commerce monetization and further penetration into low-tier cities.