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) rivals Li Auto (LI) and XPeng (XPEV), as well as gaming giant NetEase (NTES) and e-commerce play PDD Holdings (PDD) are China stocks worth watching or potentially buying.
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After China finally eased strict Covid restrictions in late 2022, there was a lot of optimism about a Chinese economic revival. But growth has sputtered in recent months, while the long-ailing property sector is worsening. Despite Chinese officials vowing to support the economy, actual stimulus has been limited beyond some modest rate cuts and urging state-owned banks to bolster lending.
That’s taken a toll on Chinese stocks in recent weeks, though they are trying to find their footing.
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. Beijing has retaliated.
Investors should pay attention to many other Chinese stocks, including EV and battery giant BYD (BYDDF), e-commerce titan Alibaba (BABA), messaging and gaming player Tencent (TCEHY) and search giant Baidu (BIDU) among others.
The best-performing Chinese stock right now may be Miniso (MNSO), a China-based retailer with a big international presence, including the U.S. But MNSO stock is extended.
Top Chinese Stocks To Buy Or Watch
Company | Ticker | Industry Group | Composite Rating |
---|---|---|---|
Li Auto | LI | Auto Manufacturers | 99 |
Trip.com | TCOM | Leisure-Travel booking | 99 |
XPeng | XPEV | Auto Manufacturers | 71 |
NetEase | NTES | Computer Software-Gaming | 93 |
PDD Holdings | PDD | Retail-Internet | 92 |
Li Auto Stock
Li Auto is a China EV startup.
It currently makes three premium SUVs with small gas engines for range extenders. It’ll roll out its first all-electric EV, the Mega minivan, later this year.
Li Auto deliveries have surged to above 30,000 a month, hitting 34,134. Production bottlenecks are limiting further growth, but that should end in October as a Beijing plant begins output later this year.
Li Auto will release August delivery figures on Sept. 1.
Unlike fellow startups XPeng and Nio (NIO), Li Auto is now profitable, earning 13 cents per ADS in Q4 2022, 20 cents in Q1 and 36 cents in Q2. Revenue growth has accelerated for three straight quarters, to 203% in Q2.
Li Auto has been able to avoid the China EV price war. However, Li will face increasing competition as it expands its vehicle lineup and rivals expand their offerings, including BYD’s premium Denza brand.
Li Auto stock peaked at a two-year high of 47.33 on Aug. 7, up 120% vs. its April 25 low of 21.48 and 278% from its 52-week low of 12.52 on Oct. 24, 2022. LI stock plunged following earnings but are finding support at the 50-day/10-week line.
Investors could use a move above the 21-day line as an aggressive entry, though a longer pause or a new base would be constructive.
Bottom line: LI stock is not a buy.
Trip.com Stock
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.
Q1 earnings easily beat views, with revenue up 107% vs. a year earlier.
Q2 results are due in early September.
Analysts expect full-year EPS to soar 465%, topping pre-Covid levels.
Trip.com stock cleared a 38.16 buy point in late July, running up to 43.59 on Aug. 10, a two-year high.
Shares round-tripped that move, but found support at the 50-day line. Investors could use 40.17, the top of the old base, as a possible entry.
Bottom line: TCOM stock is not a buy.
XPeng Stock
The China EV startup is still losing money, and that’s likely to continue through 2024. Q2 revenue tumbled 37% vs. a year earlier, though it did improve vs. Q1, the first sequential gain in six quarters.
Revenue is improving along with deliveries, which have increased vs. the prior month for six straight months.
XPeng’s July deliveries jumped to 11,008, buoyed by sales of the new G6. The crossover SUV has similar specs to a Tesla Model Y, but at a much-lower price. Hopes are high that G6 sales can ramp up, but it faces many quality rivals beyond the Model Y.
Xpeng has guided for Q3 deliveries of 39,000-41,000 units, implying it will deliver 27,992-29,992 vehicles in August and September.
It’ll report August sales on Sept. 1.
XPEV stock more than tripled from the June 1 low of 7.50 to a 52-week high of 23.62 on July 28. Shares then sold off to test the 50-day line following Q2 results, but shares have rebounded back above the 21-day.
XPeng stock seems extended right now, and could use a pause for a few weeks to set up a new base.
Bottom line: XPEV stock is not a buy.
NetEase Stock
NetEase is a leading online game provider.
Earnings growth is accelerating, but flat Q2 revenue came in a little.
Video games accounted for 78% of Q2 revenue. NetEase offers a search engine, streaming music and other internet services.
NTES stock broke past a 94.99 flat-base buy point in June, then topped a 99.78 shelf entry on July 12. Shares peaked at 110.82 on Aug. 1, then tumbled below its 50-day line.
Bottom line: NetEase stock is not a buy.
PDD Stock
PDD Holdings is the parent of Chinese e-commerce giant Pinduoduo. It also operates the fast-growing U.S. site Temu.
Q1 earnings spiked 117% per ADS with revenue up 46%. Q2 results are due Aug. 29.
PDD stock is working on a seven-month cup-with-handle base with a 92.79 buy point. Shares have just retaken their 50-day and 200-day lines.
A little-more strength could offer an early entry within the handle, though the handle’s downtrend was fairly steep. Also, buying before earnings would be extremely risky.
Bottom line: PDD stock is not a buy.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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