Is Recovery On The Way For Chinese ADRs?
πππThe latest news is that the Chinese authorities are weighing new stimulus to meet its growth target. China is considering raising its budget deficit for 2023 with the issuance of at least 1 Trillion Yuan of additional sovereign debt for spending on infrastructure such as water conservancy projects. This could raise this year's budget deficit to well above the 3% cap set in March.
That's great news for Chinese ADRs.
jumped to 2.7% today but is still down 5% year todate. In September Daniel Zhang the head of Alibaba's Cloud unit stepped down just 2 months after he left his role as Group CEO and Chairman of Alibaba.
The cloud business is a major part of a restructuring that will split Alibaba into 6 units, each with its own boards and CEOs.
Alibaba will release its next earnings report on November 2. In August Alibaba said that its revenue grew 14% year on year in the 2nd quarter 2023. Alibaba's revenue from international commerce retail surged by 60% year on year to 17. 14 billion Yuan in the June quarter. Net income is up 51% from 34.33 billion Yuan versus 28.66 billion Yuan.
Wall Street Analysts are bullish on Baba with a Buy rating, the median target price of USD 141. 53, an upside potential of 62%.
is up 2.6% today and an impression 29% year todate. Pinduoduo reported a huge increase of 66% total revenue in 2nd quarter 2023 from RMB 31439 million to RMB 52,280 million. Pinduoduo Net Income in the same quarter increased 47% from RMB 8896 million to RMB 13,108 million.
Pinduoduo is the 3rd largest of the ECommerce company in China after Alibaba and JD.com. It is also the fastest growing as it focuses on value for money and is popular in the regional area of China. Its international arm is Temu which is in many countries worldwide including USA, Europe, Latin America, Australia and New Zealand. Pinduoduo also owns Duoduo groceries which is very popular in China.
Analysts are also bullish on Pinduoduo with a Buy rating, Target price of USD 117.75, a 7% upside potential.
Share price is up 5.8% today but still down 8% year todate.
Nio reported on October 1 that it delivered 15,641 vehicles in September, a quarterly record high of 55,432 units in Q3.
Nio also unveiled its Full stack Technologies and R&D capabilities in September. Nio released its first chip product for LiDar, providing optimal support in complicated traffic. Nio also launched its first flagship phone, Nio Phone, making Nio cars even smarter and more convenient to use.
In June, Nio signed an agreement with CNOOC to build charging stations infrastructure. CNOOC is China's 3rd largest oil producer. Nio also received a USD 1 billion investment from the investment arm of Abu Dhabi government in June 2023.
Wall Street Analysts are also bullish on Nio with a Buy rating, a median target price of USD 12.80, an upside potential of 45%.
Is up 3.5% todate but still down a massive 47% year todate. JD is the 2nd largest China ECommerce company. In August, JD share price was down 20% due to its mediocre results in its 2nd quarter earnings report. This was also due to fears about rising interest rates persisting and weak economic data from China.
JD said revenue in the quarter rose 7. 6% to USD 39.7 billion. However revenue at its core JD retail business increased just 5% in the quarter. Sales of general merchandise which includes groceries were down 10% to USD 11.2 billion.
However if we look at JD's long term growth opportunity, it still has a lot of upside potential due to JD's expansive logistics network.
Wall Street Analysts are bullish on JD with a Buy rating, Target price of USD 51.98, an upside potential of 72%.
Share price is up 5.4% in the past 5 days and 13% year todate.
Baidu specialises in Internet related services, technology products and AI. Baidu is like the Google of China. The Baidu App is the number 1 Search plus Feed App in China. Baidu is comprised of 2 segments - Baidu Core which accounts for over 70% of its revenue for the past 3 years and iQiyi which accounts for the remaining 30%.
Baidu Core is powered by AI. It has 3 growth engines. The first is the Mobile Ecosystem, a portfolio of over a dozen apps. This includes Baidu App, Haokan and Baidu Post.
AI Cloud is a full suite of cloud service and solutions including PaaS, SaaS and IaaS.
Intelligent Driving and Other Growth Initiatives which includes intelligent driving. This encompass self driving services, HD maps, automated valet parking, Autonomous navigation pilot, intelligent electric vehicles and robotaxi.
Wall Street Analysts are bullish on Baidu with a Buy rating, a Target price of USD 182.01, an upside potential of 36%.
It is exciting times ahead for these 5 awesome Chinese ADRs. For what they are offering, their share prices are undervalued. With the stimulus from the Chinese authorities, I believe there is a huge upside potential for these stocks. They just need patience and time in the markets to realise their full potential.
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$BABA, $JD, and $BIDU were beloved stocks and now they're all down 60-70% from their peak with no recovery in sight. These are blue chip companies too, not newer growth companies like Nio. $BABA and $BIDU are basically the equivalent of Amazon and Google.
Earnings is just around the corner, mid november. I see a surprise. As long as we don't see huge factory/industrial activity drops and job losses, it may be good that people are pausing on housing investments. People may have more disposable income to buy stuff.