Buy These Chinese Tech Stocks as Risk to Reward Becomes Favorable

Investing

Published: September 22, 2023 6:55 am

Last Updated: September 22, 2023 10:04 am

Despite mounting tensions between the U.S. and China several Chinese tech stocks are attractive at the moment.

Present Biden’s announcement of corporate limitations on investments in China last month has caused Chinese tech stocks to fall with the U.S. countering China’s regulations against American companies such as Apple AAPL.

With that being said, the risk to reward is becoming favorable for a few Chinese e-commerce stocks and other internet-related companies with now looking like an opportune time to buy.

E-Commerce Opportunity

Commanding much of the domestic e-commerce market share and even the global market share due to China’s large population makes Alibaba’s BABA stock worthy of consideration after its recent skid.

Giving up its year-to-date gains, Alibaba’s stock is now down -3% in 2023 and -8% over the last month. However, earnings estimates have continued to trend higher and are noticeably up over the last quarter quieting fears surrounding China’s slowing GDP growth and landing Alibaba’s stock a Zacks Rank #1 (Strong Buy).

Alibaba’s annual earnings are now forecasted to jump 15% in its current fiscal 2024 and rise another 7% in FY25 to $9.80 a share with BABA starting to make the case for being undervalued at just 9.3X forward earnings.

Still somewhat of a hidden gem in the Chinese e-commerce space, Vipshop Holdings stock (VIPS) also sports a Zacks Rank #1 (Strong Buy). Vipshop’s niche as an online discount retailer for various branded consumer goods appears to be paying off.

Expansive bottom-line growth is anticipated with Vipshop’s earnings projected to soar 39% in its FY23 and jump another 11% in FY24 to $2.38 per share. More importantly, earnings estimates are nicely up over the last 60 days making Vipshop’s 6.7X forward earnings multiple very attractive as well. Plus, VIPS shares are still up a modest +6% for the year with the -8% decline in September starting to look excessive.

Opportunity in Online Travel

While there may be back-and-forth concerns about China’s regulations for big tech companies like Alibaba and Apple, Chinese online travel service company MakeMyTrip Limited MMYT may be able to stay clear of geopolitical scrutiny.

Even better is that travel demand should remain higher with China reopening its borders earlier in the year and ending its zero-Covid 19 policy. To that point, MakeMyTrip’s stock covets a Zacks Rank #1 (Strong Buy) as earnings estimate revisions have continued to skyrocket in the last 60 days for both its current FY24 and FY25.

MakeMyTrip’s stock has soared +30% this year and its -3% month-to-date dip is starting to look like a healthy correction. This is especially the case with FY25 earnings expected to come back to reality at $1.48 a share following spiked demand and an exceptional EPS forecast of $7.12 per share in MakeMyTrip’s current fiscal year.

Takeaway

There is opportunity brewing in these Chinese tech stocks considering their earnings potential which is being reconfirmed by rising EPS estimates. Overall, after the broader selloff among Chinese securities, better entry points are being created for Alibaba, Vipshop Holdings, and MakeMyTrip Limited’s stock.
MakeMyTrip Limited (MMYT): Free Stock Analysis Report

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