It was a big year for China's online companies. Most of the more popular dot-com darlings went on to beat the market in 2017, and many of those winners saw their shares more than double in value.
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Tencent (NASDAQOTH: TCEHY), New Oriental Education (NYSE: EDU), and Weibo (NASDAQ: WB) all more than doubled this year. Let's go into what made each company tick higher in 2017.
Tencent: Up 115%
With a market cap closing in on $500 billion, Tencent is one of the world's most valuable companies. If it more than doubles again in 2018, it could become the first company to cross $1 trillion in market capitalization. But despite Tencent's gargantuan size and heady momentum, it's not a household name for stateside investors.
Tencent dabbles in a lot of online fields, and as big as it is, there always seem to be opportunities for growth. Tencent's revenue surged 61% in its latest quarter, fueled by gains in smartphone and PC games, payment services, digital content subscriptions, and online advertising.
Margins can be chunky for successful companies in cyberspace where models are scalable, and China's kind taxation sweetens the pot for its more successful companies. Tencent's clocked in with net margin north of 25% every year for more than a decade, milking more money out of its billions in quarterly revenue. Tencent is growing twice as quickly as it was two years ago, and back-to-back years of rapidly accelerating growth have been more than enough for this internet-savvy behemoth to soar through 2017.
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New Oriental Education: Up 125%
Private education is a big deal in China, where the wealthy and rapidly expanding middle class is willing pay up to give children a better shot at success. New Oriental Education is a leading provider in this niche, the top dog in the country based on program offerings, student enrollments, and geographic presence. It's not technically an internet company, but there is an online education component to its tutoring model, with more than 17 million of its 30 million-plus students relying on internet-based offerings.
Revenue rose 24% in its latest quarter, and its top-line growth is on pace to accelerate for the third year in a row. Penetrating deeper within China by opening new leaning centers and building out its online platform will keep growth humming along in the near term.
Weibo: Up 155%
It's been more than three years since Weibo was spun off as its own company, and after it doubled for investors in back-to-back years, it's safe to say that that was the right call. Social networking has been more hype than substance for Chinese companies in the past, but Weibo seems to be striking the right balance in engaging its growing audience.
Revenue soared 81% in its latest quarter, and it's been accelerating for the past seven. Profitability has been growing even faster. There will always be the fear that fickle users will flock elsewhere, but Weibo has achieved critical mass with its sticky platform.
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Rick Munarriz has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Tencent Holdings. The Motley Fool recommends New Oriental Education & Technology Group and Weibo. The Motley Fool has a disclosure policy.