September 30th, 2021 | 11:36 CEST
Infineon, AdTiger, Alibaba: China as a huge comeback opportunity
Table of contents:
Infineon: What comes after the chip shortage?
Infineon does not have a digital business model in the strictest sense - after all, the Bavarians have to physically manufacture chips. They are thus bound by the traditional limits of industrial production. But Infineon, as a chip manufacturer, benefits directly from the digitization trend. For months, chips have been scarce and hard to come by, even for large automotive groups. In this environment, anyone who manufactures the coveted products - like Infineon - can consider themselves lucky. Infineon used to be considered a manufacturer of memory chips. But those days are over. The Bavarians now serve the automotive industry (41% share of sales), traditional industry (about 15%) and the energy sector (about 30%). The smart card business accounts for just over 10% of sales.
In the first half of the fiscal year, Infineon increased its sales by more than 35% to EUR 5.3 billion. Earnings also climbed by more than 60% to EUR 0.52 per share. As a result, Infineon generated a free cash flow of EUR 719 million in the half-year. Infineon is perfectly positioned to benefit from the digitalization of traditional industries. The prospect of autonomous driving alone could bring the Company enormous growth. However, the chip shortage is already making some carmakers rethink. The market power of suppliers around chips could crumble in the long term if more and more carmakers become self-sufficient around chips. On the stock market, Infineon's share has lost momentum in the last three months.
AdTiger: Specialist for online marketing in China
Investors will find a completely different situation with the Asian marketing specialist AdTiger. The Company specializes in online advertising and prefers to place ads on Facebook, Google, Twitter, Snapchat and TikTok. AdTiger operates its own optimization platform called AdTensor. Thanks to artificial intelligence, AdTiger aims to identify market niches and design ads to click. As a link between the largest social networks, the marketing departments of companies and users on the web, AdTiger can gain valuable insights into user behavior and the requirements of potential customers. This data can be incorporated into further campaigns and represents a treasure trove of data in its own right.
Currently, AdTiger is primarily active in China but also wants to expand abroad. The Company has its own investment company for this purpose. In the wake of China's worries, the share price has also suffered considerably. Since the uncertainty has subsided in the meantime, AdTiger could be an interesting alternative. While the media here are still puzzling over the fate of Evergrande, observers in Asia are already giving the all-clear and see the country continuing on its growth path. While the energy shortage in China recently reported by the New York Times is not positive news, it is anything but a signal of flagging growth. AdTiger remains a promising stock, and with a market cap of around EUR 50 million, it also has a size that can accommodate growth investors.
Alibaba incurs the wrath of Beijing
Alibaba shareholders are also currently experiencing turbulent months. China's Amazon has been punished on the stock market for a year and lost around 45% during the period. During the past three months alone, the decline accelerated once again. Corporations like Alibaba have drawn the ire of the central government in Beijing. In the meantime, the government is pursuing a state-centered course and is worried about capitalist parallel worlds that it tolerated for many years. Given the many millions of Chinese with purchasing power who enjoy the life of the middle class, however, even the party in Beijing is unlikely to put the capitalist spirit back in the bottle. Instead, it looks like some excesses should be mitigated, and areas that the state has identified as harmful should be regulated. These include computer games, which the government now warns against. Thanks to surveillance, it is now also easy to limit the consumption of computer games.
However, since Alibaba's share price is around 35% above the level of five years ago, the stock can be considered attractive again. While measures against the large corporations, in particular, are conceivable, little should change in the system of capitalist socialism in China. The country remains the world's growth engine, especially when it comes to future technology.
While Infineon is currently in a good position, many car companies could go their own way in the long term, and there is little that can be done about Alibaba. The small Company AdTiger is also sitting in a favorable market position as a specialist for online marketing in China. In addition, there are expansion plans that are certainly also in Beijing's interest. If you are looking for dynamic growth, you can favor AdTiger; otherwise, you should wait for Alibaba to bottom out.
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