China is the world’s No. 2 economy and home to dozens of companies that trade in the U.S. Right now, Trip.com (TCOM), Tesla (TSLA) rival BYD (BYDDF), Li Auto (LI) Vipshop (VIPS) and NetEase (NTES) are China stocks worth watching or potentially buying.
It’s been a tough couple of years for Chinese stocks. The Covid pandemic, and Beijing’s zero-Covid policy, have slammed the economy. Meanwhile, regulatory crackdowns vs. technology and data-centric firms such as Alibaba (BABA), Tencent (TCEHY) and NetEase (NTES) have been a major headwind. The tech crackdown seems to have eased. But Covid restrictions have largely been rolled back, raising hopes for stronger growth as 2023 goes on.
U.S. tensions are a concern. In recent months, the White House has barred shipments of key chip technology to China, adding to tariffs and other curbs on Chinese goods.
But after a long stretch where it was difficult to find five top China stocks to buy or watch, a growing number of Chinese companies are setting up. Alibaba, Tencent, ZTO Express (ZTO) and Baidu (BIDU) are among others close to buy points.
Top Chinese Stocks To Buy Or Watch
|Company||Ticker||Industry Group||Composite Rating|
|Li Auto||LI||Auto Manufacturers||95|
BYD is China’s largest EV maker, and has recently become the country’s biggest automaker period. It’s also the largest maker of electric vehicles, including its high-mileage plug-in hybrids. It still lags Tesla in battery electric vehicles, or BEVs, but has narrowed the gap considerably.
BYD reported Q1 net profit surged 411% vs. a year earlier, while revenue jumped nearly 80%. But actual earnings and sales were down substantially vs. Q4 2022. Some of that reflects a seasonally slow first quarter, with China New Year. Some of it reflects higher R&D spending. But it also reflects the impact of a fierce China EV price war.
BYD didn’t rush into the price war, though discounts and price cuts have picking up in recent weeks.
BYD’s April sales of 210,295 vehicles, were up slightly from March’s 207,080, but still down substantially vs. December.
Of the 209,467 personal vehicles, BYD sold 104,364 BEVs and 105,103 plug-in hybrid vehicles (PHEVs).
The automaker also likely is pinning its hopes on strong demand for new models, including the compact Seagull that will start at around $10,700.
BYD now has EVs ranging from just under $11,000 to $160,000.
The EV giant is massively expanding its vehicle and battery production capacity. It’s building a factory in Thailand. It’s also going to build a plant in Vietnam, with speculation that plants in Brazil, Europe and Indonesia could follow.
BYD stock is just above a 31.17 cup-with-handle base buy point.
BYD stock is listed in Hong Kong and trades over the counter in the U.S.
Bottom line: BYDDF stock is a buy.
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Trip.com is a Chinese online travel firm, with operations in various countries.
It’s one of the biggest beneficiaries of China’s reopening, with millions of people eager to travel within China and beyond.
Trip.com’s Q4 earnings rose 38% vs. a year earlier, defying views for a loss. Revenue fell 1%, also topping views. The company was bullish on travel, with analysts expected hot growth in 2023-2024.
Q1 results are due May 24.
Trip.com stock more than doubled from the October low of 19.25 to the Jan. 27 peak of 40.17.
A base has formed with a 40.27 buy point. But shares have fallen below their 21-day and 50-day lines. The did recently find support near their 200-day.
Bottom line: TCOM stock isn’t a buy.
Tesla Vs. BYD: Which EV Giant Is The Better Buy?
Vipshop is a Chinese e-commerce site, specializing in discount, limited sales. Earnings have rebounded for the past three quarters but revenue has continued to fall.
One issue for VIPS stock is that shares of its larger rivals, namely Alibaba, JD.com and PDD Holdings, are not acting well.
VIPS stock briefly rallied above a 16.08 handle buy point in a three-month base, hitting a 52-week high. But shares tumbled back after Alibaba earnings, moving below the 50-day line.
Vipshop earnings are due May 23.
Bottom line: VIPS stock is not a buy.
Li Auto Stock
Li Auto makes premium hybrid SUVs, though it’s moving down the price scale as it expands its lineup, with a non-SUV on the horizon.
Li Auto is expanding rapidly and is already profitable. Consistent profits have been tricky, but with the end of Covid restrictions and production ramping up, Li Auto is set to see booming earnings in 2023 and 2024.
On May 10, Li Auto reported first-quarter earnings surged 186% vs. a year earlier, far above views. Revenue spiked 96.5% to $2.74 billion. Already reported deliveries were 52,584, up 66%.
For the second quarter, Li sees deliveries of 76,000-81,000. It’s already reported a record 25,681 deliveries for April, up 23% vs. March.
China’s EV price war is a concern. While the price war is most intense at the 200,000-300,000 RMB segment, the premium segment is getting increasingly crowded. And Li Auto’s move toward the mainstream market, while greatly expanding its target audience, also exposes itself to fierce competition.
Li Auto unveiled its EV-only plans on April 18 at the Shanghai Auto show.
From the Oct. 24 low of 12.52, LI stock more than doubled to 27.48 on Feb. 2. Shares then consolidated.
Li briefly broke out of a double-bottom base in April, but that quickly failed. But on May 10, shares blasted past a new 26.37 early entry and 27.58 official buy point.
Shares are now extended from the base. After surging in its breakout week, LI stock traded tightly the following week, showing some elements of a short-stroke pattern.
Bottom line: LI stock is not a buy.
NetEase is a China mobile gaming giant.
Q4 EPS fell 32% vs. a year earlier, while revenue dipped 4%.
After running from 53.09 in late October to 93.19 in late January,
After a consolidation, NTES stock briefly broke out on April 17, but that quickly failed. Shares have now forged a flat base next to that prior consolidation, with a new 95.09 buy point.
Shares are just below the 50-day line.
Bottom line: NTES stock is not a buy.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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