The current rotation out of technology stocks has accelerated, leading to a broad-based pullback in the entire market. The Dow Jones Industrial Average, S&P 500 and NASDAQ have all been driven lower in recent weeks as investors, fearing rising inflation, jump out of technology names and into cyclical and industrial stocks that are likely to perform well as the global economy reopens following the Covid-19 pandemic. Investors may see this as a buying opportunity and look for stocks to buy.
Additionally, while U.S. stocks have seen their share prices drop precipitously, so too have Chinese stocks. Many of China’s leading companies have seen their shares fall to rock-bottom prices, representing a great buying opportunity for investors who know where to look.
In this article, we explore seven Chinese stocks for the current pullback.
- Alibaba (NYSE:BABA)
- Nio (NYSE:NIO)
- Baidu (NASDAQ:BIDU)
- JD.com (NASDAQ:JD)
- Bilibili (NASDAQ:BILI)
- Trip.com (NASDAQ:TCOM)
- NetEase (NASDAQ:NTES)
Chinese Stocks to Buy: Alibaba (BABA)
Shares of Chinese technology-giant Alibaba were beaten down before the current rotation out of technology stocks began in earnest. BABA stock has trended lower ever since the conglomerate’s attempt to spin off its digital-payment business Ant Group in an initial public offering (IPO) was scuttled by Chinese regulators late last fall and Alibaba founder and Chief Executive Officer Jack Ma seemingly went into hiding for several months. While Alibaba has said that it remains committed to listing Ant Group, which operates China’s largest digital payment platform “Alipay,” on the Hong Kong Stock Exchange, investors appear to have taken a wait-and-see attitude.
BABA stock is now trading at just above $233 a share, 27% below its 52-week high of $319.32, which was achieved at the end of October. With the rotation out of technology stocks in full swing, Alibaba’s share price has continued to be pushed down. Smart, long-term investors would be wise to see this as a momentous buying opportunity.
The fundamental story of Alibaba has not changed and remains extremely positive. The company is still China’s premier technology concern with market-leading ventures in e-commerce, fintech, artificial intelligence, cloud computing, the Internet of Things (IoT) and many others.
The median price target among the 53 Wall Street analysts who cover Alibaba is $325.62 a share, suggesting potential growth of 40% from its current price. The high estimate on BABA stock is $420.85 per share. Additionally, it’s worth noting that the low estimate on the stock is $247.73, 6% higher than its current share price. Right now, Alibaba stock is on sale.
Electric-vehicle (EV) maker Nio, often billed as China’s answer to Tesla (NASDAQ:TSLA), had seen its share price weaken after disappointing Wall Street with its latest earnings report. But the downward slide for NIO stock has quickly turned into an avalanche as investors sprint to the exit on inflation fears.
Despite its revenue reaching $1 billion for the first time in the fourth quarter of last year, Nio missed analysts’ expectations on both earnings and revenue, reporting a loss of 16 cents per share. For the full year, Nio said its delivered 43,728 vehicles, less than 10% the nearly 500,000 vehicles delivered by Tesla.
NIO stock has been heavily battered, down nearly 33% in the past month to roughly $40 a share. In February, the company’s share price was above $62. However, as with Alibaba, analysts say investors should look to buy Nio stock on the cheap as the share price craters.
U.S. bank JPMorgan (NYSE:JPM) issued an upbeat analyst report on Nio recently, urging investors to grab shares while they’re trading at a deep discount. JPMorgan has an outperform rating on Nio and a price target of $70 a share. That view is in line with 18 other analysts who have a median price target of $69.39 on the stock. The median estimate represents a 73% increase from Nio’s current share price.
Until very recently, internet-services company Baidu was one of the best-performing Chinese stocks on the NASDAQ. BIDU stock rallied 757% from the start of the year until Feb. 19. Since then, it has been all downhill for the company’s shareholders.
As the pullback has accelerated, so too has the sell-off in Baidu stock. At its current level of $254 a share, Baidu stock is now 28% below its all-time high reached just a few weeks ago. It’s led many investors to question the company, which has been dubbed “China’s answer to Alphabet’s Google” (NASDAQ:GOOG, NASDAQ:GOOGL).
But, as with many of the other companies on this list of stocks to buy, the story at Baidu hasn’t changed despite the slump in its share price. Much of the growth in BIDU stock this year was prompted by the news that the company is entering the electric vehicle space through a partnership with automaker Geely (OTCMKTS:GELYF) that will allow Baidu to provide software and technology for the electric vehicles that Geely manufactures.
While it could be argued that Baidu stock ran too high too quickly this year, the current crash in its share price represents a great chance for investors to get a piece of this company on the cheap. The median price target on Baidu stock is $356.81 a share, with a high estimate of $445.26. The median estimate represents a 40% increase from the current share price.
Another high-flying Chinese tech company whose share price has been brought back down to earth is Chinese e-commerce behemoth JD.com, also called Jingdong. JD stock enjoyed a healthy 22% increase in the first two months of this year before falling 17% to its current level of just under $90 a share. China’s version of Amazon (NASDAQ:AMZN) has inspired a devoted, almost cult-like, following and performed spectacularly during the global pandemic as growing hordes of people turned to online shopping.
Investors seemed to get excited earlier this year when JD.com announced that it would be the first Chinese company to accept the country’s digital Yuan currency as form of payment on its online shopping mall. Adopting new technologies and being the first out of the gate with many ventures is part of the reason why JD stock has risen 274.5% over the past five years, making it one of the top-performing Chinese stocks listed on a U.S. exchange. Sadly, JD.com hasn’t been able to escape the current pullback.
Yet analysts remain bullish on JD stock. The median price target on the stock is $109.21, with a high estimate of $168.55. The median estimate suggests the potential for a 22% profit from the stock’s current share price.
Bilibili is a bit different than the other companies on this list of stocks to buy. The company runs an online platform focused on anime, comic books and video games. Bilibili claims to be focused squarely on a youth audience, primarily Generation Z. While this may sound like it would have limited appeal, the company has proved to be extremely popular with its core audience. So much so that BILI stock has risen more than 309% over the past 12 months as investors bought into the company’s growth story.
Momentum continued at the start of this year as BILI stock rallied 82% in the first six weeks of 2021. Sadly, that momentum seems to be rapidly decelerating as the stock has dropped 26% since mid-February and now sits at $109 a share. The decline has come despite Bilibili’s revenue from its mobile gaming division rising 45% in the first nine months of last year. The company’s advertising revenue also continues to be on fire.
Analysts continue to expect big things from Bilibili and its youthful customer base. The median price target on BILI stock is $158.38 a share, with a high estimate of $221.73. The median target represents a 45% increase from the current share price.
The anticipated boom in travel as the spread of Covid-19 recedes won’t be confined to the United States. China’s 1.4 billion citizens are also expected to travel and vacation both at home and abroad. And when it comes to travel, Trip.com is China’s largest online travel company. It provides customers with accommodation reservations, transportation and packaged tours. Additionally, it manages business travel for corporate clients. Think Expedia (NASDAQ:EXPE) on steroids.
TCOM stock is not only the most affordable on this list of stocks to buy, but it has weathered the current downturn fairly well. While the company’s share price has retreated in recent trading sessions, it is trading basically flat since the end of February. The fact that Trip.com is viewed as a reopening play and is likely to benefit from the expected surge in travel demand has helped to insulate the company’s stock from the pullback.
The median price target of $44.60 is only slightly above Trip.com’s current share price. The high estimate on the stock is $51.54 a share.
Chinese video-game developer NetEase has been firing on all cylinders lately. The company, which develops online personal computer (PC) and mobile video games, saw its revenue increase 25.6% year-over-year in the fourth quarter ended Dec. 31. NetEase’s gross profit increased 20.9% year-over-year in the fourth quarter as well. Oh, and a concert the company broadcast on its website featuring a popular Chinese boy band set the Guinness World Record for “most viewed paid concert.”
In spite of all the success, NTES stock has fallen 13% over the past month to $107 a share. The drop followed a run-up of nearly 150% in the past 12 months. As with the other stocks to buy on this list, the current retrenchment should be viewed as an opportunity to buy at sale prices. The future of this popular video-game company should not be doubted.
The median price target of 36 analysts who cover NTES stock is $134.08 a share, for a 25% upside. The high estimate is $157.16 per share.
On the date of publication, Joel Baglole held long positions in NIO, TSLA, BABA and BIDU.
Joel Baglole has been a business journalist for 20 years. He spent five years as a staff reporter at The Wall Street Journal, and has also written for The Washington Post and Toronto Star newspapers, as well as financial websites such as The Motley Fool and Investopedia.