Key points
- Despite the challenges of the Chinese market, some U.S. asset managers see potential in Chinese stocks, highlighted by recent underlying actions.
- Recent support measures from Beijing suggest a turnaround in Chinese markets, with valuations equal to half those of the S&P 500 index.
- Stocks like JD, BABA and BIDU have suffered significant declines, but now offer potential value opportunities, with analysts predicting substantial upside for each.
- 5 stocks we like better than JD.com
After several years of market losses in China, geopolitical tensions and a prolonged real estate crisis, some U.S. asset managers remain undeterred and see potential in Chinese stocks. Additionally, several U.S.-listed Chinese stocks may have bottomed recently, providing a potentially excellent risk:return opportunity.
Despite significant outflows and a sharp decline in the CSI 300 Index, Beijing’s recent support measures suggest a potential turnaround. As Chinese markets reopened after the Lunar New Year, Chinese markets showed signs of stabilization after hitting lows earlier in the year. Current valuations represent an attractive proposition for investors, with China’s CSI 300 index trading at half the valuation of the S&P 500 index. Jonathan Krane, CEO of China-focused ETF provider KraneShares, believes this presents a unique opportunity , labeling it as potentially a “once-in-a-lifetime” opportunity to invest in Chinese stocks.
In this context, it is worth exploring whether stocks such as JD, BABA and BIDU have been oversold, given the prevailing economic challenges in China, and whether they now offer an attractive risk-return scenario.
We look at each stock to assess their turnaround potential and whether they are approaching value territory or have confirmed a bottom.
Alibaba is a major giant in eCommerce and Internet technology. Its main platform, Alibaba.com, is the third largest e-commerce platform in the world by sales. Alibaba offers infrastructure and marketing support for merchants of all sizes, facilitating brand development and customer connections in China and internationally.
Over the previous year, BABA shares are down nearly 15% and nearly 75% from their 2020 high. More recently, however, the stock is nearly flat year-to-date and appears to have confirmed a short-term bottom term. nearly $70 after the stock attempted to break down multiple times and entered support. From a valuation perspective, BABA trades at a P/E of 14 and offers a dividend yield of 1.29%, making it an attractive proposition for value investors. Analysts expect significant upside for the eCommerce giant, with a price target of $115.44, nearly 52% above current prices. The stock has a Moderate Buy rating based on sixteen analyst ratings.
Baidu focuses on Internet-related services and artificial intelligence. It offers various products and services, including the widely used Baidu Search, China’s leading search engine. The company has expanded into cloud services, providing storage, data analytics, and artificial intelligence services through Baidu Cloud.
Much like BABA, BIDU shares are down nearly 15% year over year and just over 6% year to date. However, after briefly trading below $100 earlier in the year, the stock has since given up and confirmed a higher low, potentially marking the bottom of its downtrend. BIDU offers no dividends to shareholders, but the stock trades at a low P/E of 12.74 and has forecast earnings growth of 18.99%. Notably, the stock has a buy rating based on sixteen analyst ratings and a price target of nearly 60% upside.
JD.com is a major Chinese e-commerce company founded in 1998 by Qiangdong Liu. Originally started as an online magneto-optical store, JD.com has evolved into one of China’s largest B2C online retailers, offering various products, including electronics, mobile phones, computers and more. Operating across multiple segments such as JD Retail, JD Logistics and JD Technology, the company is known for its authentic products, competitive pricing and customer-centric approach.
Shares of the online retailer have taken a hit recently, falling nearly 50% from a year earlier and more than 17% year to date. Significant declines, however, have now translated into a potential opportunity for investors seeking deep value. JD offers a dividend yield of 2.51% with a low P/E of 11.33. While the stock is consolidating at the low end of its 52-week range, it is now trading near near-term consolidation resistance. A move above $24 could confirm a change in momentum and mark the start of the year low as a low. Like BABA, analysts have rated JD a Moderate Buy, predicting an impressive 75% upside based on the $42 consensus price target.
Before considering JD.com, you’ll want to hear it out.
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