Despite the lackluster economic data from July, China remains steadfast in its commitment to elevate its economic trajectory. Evident in its proactive pursuit of growth-inducing measures, it seems wise to watch China stocks Alibaba Group Holding Limited (BABA), JD.com, Inc. (JD), and Baidu, Inc. (BIDU) this month.
Before delving into the highlighted stocks, let's acquire a comprehensive understanding of the prevailing economic landscape in China.
Last month, China's retail sales registered a 2.5% increase compared to the previous year, a figure below the projected 4.5% upswing according to analysts polled by Reuters. Industrial production also experienced a 3.7% year-over-year increase, falling short of analysts' expected 4.4% surge.
Despite the less robust economic data in the past month, the nation appears determined to surmount the prevailing challenges. The National Bureau of Statistics has emphasized the need to enhance macroeconomic policies, stimulate domestic demand, bolster confidence, and mitigate risks.
Furthermore, China's Premier Li Qiang has affirmed the nation's dedication to attaining its annual economic objectives. Li has also advocated for harmonious integration of security and development to foster comprehensive business growth. China has a gross domestic target of around 5% growth.
Additionally, China's policymakers recently unveiled a range of pledges tailored to specific sectors designed to instill confidence among private and foreign investors in a more conducive investment climate. Chinese officials have also indicated a measured and targeted approach to policy support, reflecting a deliberate strategy.
Considering the nation's efforts to enhance its economic prospects, it might be prudent to consider adding Chinese stocks BABA, JD, and BIDU to your watchlist.
Let’s examine the featured stocks in detail.
Alibaba Group Holding Limited (BABA)
Based in Hangzhou, China, BABA provides merchants, brands, and businesses with technology and marketing prowess. It operates through seven segments, China Commerce; International Commerce; Local Consumer Services; Cainiao; Cloud; Digital Media and Entertainment; and Innovation Initiatives and Others.
On May 25. Alibaba Cloud, BABA's digital technology and intelligence cornerstone, and MongoDB, Inc. (MDB), renowned for its leading non-relational database, unveiled a four-year extension to their strategic global partnership. The alliance, initially introduced in 2019, has witnessed noteworthy expansion fueled by robust collaboration.
By synergizing the MDB database with Alibaba Cloud's distinct capabilities, BABA's clientele can expedite innovation and business scalability. This collaboration, operating on ApsaraDB for MDB, effectively streamlines costs and enhances productivity. Consequently, BABA could benefit from an elevated customer experience.
For the first quarter that ended June 30, 2023, BABA’s revenue increased 13.9% year-over-year to $32.29 billion. Its adjusted EBITDA grew 26.6% from the year-ago value to $7.18 billion. Also, the company’s non-GAAP net income and non-GAAP EPS rose 48.5% and 47.6% year-over-year to $6.20 billion and $0.30, respectively.
For the fiscal year ending March 2024, BABA’s revenue is expected to increase 7% year-over-year to $132.06 billion. The company’s EPS for the current year is expected to come in at $8.90, up 14.8% from the prior year. Moreover, the company topped the consensus EPS estimates in all four trailing quarters.
Shares of BABA gained 1.7% intraday to close the last trading session at $90.65.
BABA’s solid fundamentals are apparent in its POWR Ratings. The stock has an overall rating of B, equating to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
BABA has a B grade for Quality, Growth, and Sentiment. It is ranked #4 in the 44-stock China industry.
In addition to the POWR Ratings I’ve just highlighted, you can see BABA’s ratings for Momentum, Stability, and Value here.
JD.com, Inc. (JD)
Headquartered in Beijing, China, JD provides supply chain-based technologies and services. The JD Retail segment encompasses online retail, marketplace, and Chinese marketing. The New Businesses segment offers third-party logistics, overseas business, tech projects, asset management, and property sales.
On August 16, JD and Gucci announced a digital partnership, launching Gucci's official flagship store on JD's platform. This move would allow JD to amplify its luxury appeal and broaden its audience through Gucci's renowned fashion offerings and heritage, solidifying its position as a premier e-commerce destination.
During the second quarter that ended June 30, 2023, JD’s total net revenues increased 7.6% year-over-year to $39.71 billion. Its non-GAAP EBITDA grew 45% from the year-ago value to $1.43 billion.
Also, non-GAAP net income attributable to the company’s ordinary shareholders rose 31.9% year-over-year to $1.18 billion, while non-GAAP net income per share came in at $0.37, up 33% from the prior year’s period.
The consensus revenue estimate of $150.60 billion for the fiscal year ending December 2023 reflects a marginal year-over-year improvement. Likewise, EPS for the ongoing year is expected to grow 15.3% from the previous year to $2.93. Also, the company surpassed the consensus EPS estimates in all four trailing quarters.
Shares of JD marginally slumped intraday, closing the last trading session at $34.76.
JD’s positive outlook is reflected in its POWR Ratings. The stock has an overall rating of B, which translates to Buy in our proprietary rating system.
JD has an A grade for Growth. It is ranked #17 out of 44 stocks within the China industry.
Click here to access additional JD ratings (Stability, Quality, Value, Momentum, and Sentiment).
Baidu, Inc. (BIDU)
With its Headquarters in Beijing, BIDU operates as a Chinese language Internet search provider. Its Baidu.com platform enables users to discover online information. The company operates through two segments, Baidu Core and iQIYI.
On June 16, BIDU secured commercial licensing for its fully driverless ride-hailing service in Shenzhen. Baidu's autonomous robotaxis are now permitted to offer ride-hailing without a safety operator in the vehicle, marking Shenzhen as the fourth Chinese city to embrace this innovative service.
The strategic expansion substantially widens the reach of BIDU's nationwide fully driverless ride-hailing service, setting the stage for future expansion to paying customers throughout China. These progressive expansions are poised to contribute positively to the company's growth trajectory.
For the first quarter that ended March 31, 2023, BIDU’s non-GAAP operating income increased 60.9% year-over-year to $936 million. Its adjusted EBITDA grew 48.1% from the year-ago value to $1.19 billion. Also, non-GAAP net income to BIDU and non-GAAP earnings per ADS stood at $834 million and $2.34, up 47.6% and 43.5% from the previous year’s quarter.
Analysts expect BIDU’s revenue to increase 4.7% year-over-year to $18.79 billion for the fiscal year ending December 2023. The company’s EPS for the current period is expected to come in at $9.39, up 9.8% from the prior year. Furthermore, the company topped the consensus revenue and EPS estimates in all four trailing quarters, which is impressive.
The stock has gained 9% year-to-date, closing the last trading session at $129.87.
BIDU’s outlook is apparent in its POWR Ratings. BIDU has a B grade for Value and Sentiment. It is ranked #24 out of 44 stocks within the same industry.
Click here to access additional BIDU ratings for Growth, Stability, Quality, and Momentum.
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BABA shares were trading at $87.87 per share on Friday afternoon, down $2.78 (-3.07%). Year-to-date, BABA has declined -0.25%, versus a 14.95% rise in the benchmark S&P 500 index during the same period.
About the Author: Aanchal Sugandh
Aanchal's passion for financial markets drives her work as an investment analyst and journalist. She earned her bachelor's degree in finance and is pursuing the CFA program. She is proficient at assessing the long-term prospects of stocks with her fundamental analysis skills. Her goal is to help investors build portfolios with sustainable returns.
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