The best Chinese stocks are in prime position for a rebound later this year.
Ray Dalio, the billionaire behind the world’s largest hedge fund, recently discussed the attractiveness of Chinese stocks amidst market uncertainty. Dalio advocates for diversification into Chinese stocks and highlights how the upcoming presidential election presents a major risk for the U.S. market.
With that in mind, here’s a list of three of the most attractively priced Chinese stocks to buy, offering tremendous upside potential. Taking it from Dalio, the strategic shift towards buying the best Chinese stocks offers a significant opportunity to expand and balance your investment portfolios.
Alibaba (BABA)
Alibaba (NYSE:BABA) has been dead money in the past few years, with multiple headwinds weighing down its business. However, the trailblazer in eCommerce and cloud computing is in for a major rebound, as it starts posting robust quarterly results again. Wall Street analysts also concur, assigning a “buy” rating to the stock, offering a 33% upside from current prices.
BABA released its Q4 results last month, showing it is back on the growth track. Revenues jumped 7% to $30.7 billion, beating estimates by a healthy $310 million. Moreover, its investments in Alibaba Cloud and eCommerce led to double-digit growth in its gross merchandise value. What was most heartening was the strong single-digit growth in its core eCommerce business despite a weak Chinese retail environment.
The star of the show was Alibaba Cloud division, which posted a strong 3% increase in sales to $3.5 billion. These results were linked to the triple-digit growth in AI-related sales, which boosted overall cloud sales in the robust public cloud sector.
NetEase (NTES)
NetEase (NASDAQ:NTES) is a leading Chinese mobile gaming company with a revenue base exceeding $14.5 billion.
Despite its relatively strong top-line performance and robust bottom-line position, NTES stock has fallen out of favor with investors. Nevertheless, it continues to prove its detractors wrong with its strong operating performances. Its most recent Q1 report saw $3.7 billion in sales, a 7.2% increase year-over-year (YOY). Moreover, its Non-GAAP ADS of $1.84 beat estimates by 12 cents. Additionally, its recent annual product launch event showcased several promising new games, pointing to a stellar content pipeline.
NetEase has the edge in China’s burgeoning mobile gaming market, which currently commands a whopping 47% of global mobile gaming revenue. Despite the country’s declining population, the number of gamers in China could top 730 million by 2027. Moreover, with a staggering 31% of China’s domestic market spend directed towards mobile games, the company’s offerings are indispensable.
Baidu (BIDU)
Baidu (NASDAQ:BIDU), which is considered China’s Google, has been pioneering AI long before it became cool. Over the past decade, the firm established major research facilities in Beijing and California. Moreover, in 2019, it launched its revolutionary chatbot called Ernie, which now has upwards of 200 million users. Additionally, its enterprise client base has topped 85,000, which will likely be critical in driving its top-line growth moving forward.
It recently delivered its Q1 report, comfortably surpassing estimates across both lines. Baidu’s non-GAAP ADS rose a remarkable 24% YOY to $2.76. Meanwhile, total sales increased by 1% YOY to $4.37 billion.
Revenues from its core operations increased by 4% YOY to $3.3 billion, driven by healthy growth in its online and non-online marketing sales. Non-online marketing sales, in particular, jumped 6% to $935 million, led by the rapid increase in its AI cloud business.
These stellar results have led to multiple upward revisions, with Wall Street analysts assigning a “strong buy” rating to the stock, forecasting a 58% upside potential from current prices.
On the date of publication, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines
