4 Under-the-Radar Chinese Stocks to Own in 2021

As the US economy continues to struggle, Chinese stocks have been gaining a lot of attention due to that country’s strong recovery since the onset of the pandemic. While the enormous growth potential has sent many Chinese stocks higher, there are still several stocks with more upside. Bilibili (BILI), Trip (TCOM), Vipshop (VIPS), and Weibo (WB) are four such Chinese stocks that are strategically positioned to generate huge returns going into 2021.

While the world is still struggling to battle with the deadly virus, China has been able to contain its impact. Supported by the growth in its manufacturing sector, the Chinese economy has been showing a solid recovery. With the recent surge in the number of coronavirus cases in the United States, investors are showing confidence in the world’s second-largest economy. The consumer goods market in China is expected to beat that of the United States very soon.

While many of the Chinese stocks have received significant attention in the past months, not all stocks made it to the headlines. However, it doesn’t mean that they do not possess growth potential. Many of such lesser-noticed stocks have immense growth potential. So, it is a good idea to invest in these stocks at affordable prices right now.

Bilibili Inc. (BILI), Trip.com (TCOM), Vipshop Holdings Limited (VIPS), and Weibo Corporation (WB) are four such stocks that are expected to benefit significantly from China’s fast recovery.

Bilibili Inc. (BILI)

BILI started as a content community inspired by anime, comics, and games (ACG). It now represents the iconic brand of online entertainment for young generations in China. The company has a strategic collaboration agreement with Tencent Holdings Limited (TCEHY) for sharing and operating existing and additional anime and games on its platform. The company pioneered the ‘‘bullet chatting’’ feature which fosters a feeling of connectedness among the users.

For the third quarter ended September 2020, BILI’s top line increased 74% year-over-year to $475.1 million. The company was able to reach more users with the help of its effective user growth strategy. Average monthly active users (MAUs) increased 54% year-over-year to 197.2 million. With the increase in the number of premium content and services, average monthly paying users (MPUs) increased by 89% year-over-year to 15 million.

Analysts expect BILI’s revenue to increase 84.8% this year, and 45.5% next year. The company’s EPS is expected to increase by 36.8% next year. On a year-to-date basis, the stock has gained 237.6% to close yesterday’s trading session at $62.86. It is currently trading 4% below its 52-week high of $65.49.

BILI entered into a definitive subscription agreement with Huanxi Media Group Limited (Huanxi Media) in August to pursue collaboration opportunities in online entertainment for the Chinese market, including films and TV drama series and developing derivative intellectual property rights of the films and other TV programs owned by Huanxi Media. The company also announced its three-year strategic partnership with Riot Games for a live broadcasting league of legend events in China.

How does BILI stack up for the POWR Ratings?

A for Trade Grade

A for Buy & Hold Grade

A for Peer Grade

B for Industry Rank

A for Overall POWR Rating

The stock is also ranked #1 out of 115 stocks in the China industry.

Trip.com (TCOM)

Founded in 1999, TCOM is one of the leading online travel agencies in the world. The company has more than 1.4 million hotels in 200 countries and regions. It operates as a travel service provider for accommodation reservation, transportation ticketing, packaged tours and in-destination, corporate travel management, and other travel-related services in China and internationally.

TCOM will announce its third-quarter results today after the market closes. Accommodation revenue increased 9% sequentially to $178 million for the second quarter ended June 2020. The recovery of the Chinese domestic market led to more people traveling domestically. Corporate travel revenue increased 29% sequentially to $23 million.

Analysts expect TCOM’s revenue and EPS to increase by 66.8% and 336.5%, respectively, in 2021. The company’s EPS is expected to increase at a rate of 0.5% per annum in the next five years. TCOM’s earnings surprise history looks impressive with the company missing the consensus estimate in just one of the trailing four quarters.

At the end of October, TCOM extended its charter flight service business in Macau. The company also showcased its new air charter service at the 9th Macau Business Aviation Exhibition from 29th to 31st October. In the past 7 months, the company announced partnerships with several international airline brands to bring more benefits to loyalty program members. TCOM partnered with Bangkok Airways’ frequent flyer program, FlyerBonus which will maximize rewards for its members when making hotel reservations on Trip.com. The stock has gained 55.3% since hitting its 52-week low of $20.10. It is currently trading 13.8% below its 52-week high.

TCOM’s POWR Ratings reflect this promising outlook. It has an overall rating of “Buy” with an “A” for Trade Grade, and a “B” for Buy & Hold Grade, Peer Grade, and Industry Rank. Among the China industry, it’s ranked #18.

Vipshop Holdings Limited (VIPS)

VIPS is a leading online discount retailer for brands in China. Operating since 2008, the company operates through four segments: Vip.com, Shan Shan Outlets, Internet Finance, and Others. VIPS boasts a huge user base and dominates the online discount retail model in China trusted by customers and brands alike.

The company’s total revenue increased 18.2% year-over-year to $3.4 billion for the third quarter ended September 2020. The strong quarter result was driven by the fact that the customers recognized the value of the company’s differentiated offerings, particularly in its core apparel-related categories. Gross Merchandise Value (GMV) increased by 21% year-over-year. The number of active customers increased by 36.6% year-over-year to 43.4 million. The total orders increased by 35.4% year-over-year to 172.8 million.

Analysts expect VIPS’ revenue to increase 26.5% for the quarter ending December, 15.3% this year, and 17.1% next year. The company’s EPS is expected to increase by 23.1% in the current year, 23.4% next year, and at a rate of 2.9% per annum in the next five years. VIPS has an impressive earnings surprise history with the company beating consensus EPS estimates in each of the trailing four quarters.

Though the company has not been making headlines, it has been growing consistently. The company appointed Mr. David Cui as its new Chief Financial Officer last month. VIPS is to hold its 2020 annual general meeting of shareholders on December 4th. The stock has gained 80.2% so far this year to close yesterday’s trading session at $25.54. The stock has gained 47.3% in the past six months.

It’s no surprise that VIPS is rated “Strong Buy” in our POWR Ratings system. It also has an “A” for Trade Grade, Buy & Hold Grade, and Peer Grade, and a “B” for Industry Rank. In the China industry, it is ranked #2.

Weibo Corporation (WB)

Based in Beijing, China, WB is a leading social media for people to create, share, and discover content online. The company operates in two segments Advertising and Marketing Services, and Value-Added Services. The platform is user friendly and its distributed nature allows an original feed to become a live viral conversation stream. Moreover, WB offers a wide range of advertising and marketing solutions to companies of all sizes.

WB’s net revenues increased 19.8% sequentially to $387.4 million for the second quarter ended June 2020. Non-GAAP Net Income attributable to the company increased by 69.8% sequentially to $114.5 million. While monthly active users (MAUs) increased 7.6% year-over-year to 523 million, average daily active users (DAUs) increased 8.5% year-over-year to 229 million.

Analysts expect WB’s revenue to increase by 4.5% for the quarter ending December, and 12% next year. The company’s EPS is expected to increase by 24.4% next year, and at a rate of 1.5% per annum in the next five years. WB has an impressive earnings surprise history with the company beating consensus EPS estimates in each of the trailing four quarters.

WB’s parent company Sina Corporation (SINA) is expected to go private for a $2.6 billion deal. The company held its Annual General Meeting in August. Earlier this year, WB announced the pricing of its public offering of $750 million aggregate principal amount of its 3.375% notes due 2030. The stock has gained 37.3% in the past six months. It is currently trading 19.3% below its 52-week high. The company became profitable in the last half-decade and is expected to soar going into 2021.

WB’s strong fundamentals are reflected in its POWR Ratings, it has a “Buy” rating with a “B” in Trade Grade, Peer Grade, and Industry Rank. Within the China industry, it’s ranked #22.

 

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BILI shares were trading at $60.76 per share on Tuesday afternoon, down $2.10 (-3.34%). Year-to-date, BILI has gained 226.32%, versus a 15.36% rise in the benchmark S&P 500 index during the same period.



About the Author: Manisha Chatterjee

Since she was young, Manisha has had a strong interest in the stock market. She majored in Economics in college and has a passion for writing, which has led to her career as a research analyst.

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