Top 5 China Stocks: Tesla Rivals BYD, Li Auto Flash Buy Signals
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), Alibaba (BABA), Tesla (TSLA) rival BYD (BYDDF), Li Auto (LI) and NetEase (NTES) are China stocks worth watching or potentially buying.
It’s been a tough couple of years for Chinese stocks. The Covid pandemic, and Beijing’s zero-Covid policy, have slammed the economy. Meanwhile, regulatory crackdowns vs. technology and data-centric firms such as Alibaba (BABA), Tencent (TCEHY) and NetEase (NTES) have been a major headwind. The tech crackdown seems to have eased. But Covid restrictions have largely been rolled back, raising hopes for stronger growth as 2023 goes on.
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.
Warren Buffett said he sold most of his Taiwan Semiconductor (TSM) holdings in Q4 over China-Taiwan holdings. That comment sent China stocks tumbling on April 12. But shares are bouncing back.
But after a long stretch where it was difficult to find five top China stocks to buy or watch, a growing number of Chinese companies are setting up. TencentVipshop (VIPS), ZTO Express (ZTO) and Baidu (BIDU) are among others close to buy points.
Top Chinese Stocks To Buy Or Watch
|Company||Ticker||Industry Group||Composite Rating|
|Li Auto||LI||Auto Manufacturers||67|
BYD is China’s largest EV maker, and has recently become the country’s biggest automaker period. It’s also the largest maker of electric vehicles, including its high-mileage plug-in hybrids. It still lags Tesla in battery electric vehicles, or BEVs, but has narrowed the gap considerably.
BYD now has EVs ranging from $11,000 to $160,000, showcasing several soon-to-launch models at the Shanghai Auto Show on April 18.
BYD reported Q4 net profit of 7.3 billion yuan ($1.06 billion), up more than 1,100% vs. a year earlier. Revenue swelled 120% to 156.39 billion yuan. For all of 2022, net profit vaulted 446% to 16.6 billion yuan, exceeding the profit of the prior five years combined. Full-year revenue jumped 96% to 424.06 billion yuan. BYD Auto revenue surged 152%.
Preliminary Q1 results will likely be out before the end of April.
BYD stock has forged a base with a 34.04 buy point. Shares have recently retaken the 200-day moving average and broken a downward-sloping trendline, offering an early entry. Investors also could wait for a move above 29.86, the top of a too-low handle.
BYD stock is listed in Hong Kong and trades over the counter in the U.S.
Bottom line: BYDDF stock is an aggressive buy.
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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.
Trip.com earnings rose 38% vs. a year earlier, defying views for a loss. Revenue fell 1%, also topping views. The company was bullish on travel, with analysts expected hot growth in 2023-2024.
Trip.com stock more than doubled from the October low of 19.25 to the Jan. 27 peak of 40.17.
A new flat base has formed with a 40.27 buy point. Shares tumbled below their 50-day line on April 12 following Warren Buffett’s comments about China risks, but are back above that key level. A decisive move above the March 23 high of 38.57 would offer an early entry.
Bottom line: TCOM stock isn’t a buy.
Tesla Vs. BYD: Which EV Giant Is The Better Buy?
Alibaba is China’s No. 1 e-commerce giant, with major exposure to cloud computing, payments and more. After years of facing harsh regulatory scrutiny, Alibaba announced it would split the company into six independent units, which could pursue their own IPOs.
Alibaba earnings and revenue growth have been spotty, but investors are betting on stronger growth as China’s economy picks up steam.
That reorganization sent shares soaring above their 200-day and 50-day lines. BABA stock then consolidated for a few days just above the 50-day, forging a handle.
BABA stock plunged on April 12 on the Buffett-led China sell-off, diving below the 50-day line. Shares reclaimed the 50-day the following session. But the handle is now too low in the base to be proper.
The official base buy point is 121.40. Investors could still use 105.15 as an early entry.
BABA stock is trying to hold its 50-day line.
Bottom line: BABA stock is not a buy.
Li Auto Stock
Li Auto makes premium hybrid SUVs, though it’s moving down the price scale as it expands its lineup, with a non-SUV on the horizon.
Li Auto is expanding rapidly and is already profitable. Consistent profits have been tricky, but with the end of Covid restrictions and production ramping up, Li Auto is set to see booming earnings in 2023 and 2024.
On April 1, Li Auto reported March deliveries of 20,823 hybrid SUVs, up 89% vs. a year earlier. That’s up 25% vs. 16,620 in February. Q1 sales totaled 52,584, at the lower end of its late February forecast of 52,000-55,000.
March sales included the new L7, a five-seat electric SUV.
April sales are likely to set a new record.
China’s EV price war is a concern. While the price war is most intense at the 200,000-300,000 RMB segment, the premium segment is getting increasingly crowded. And Li Auto’s move toward the mainstream market, while greatly expanding its target audience, also exposes itself to fierce competition.
Li Auto unveiled its EV-only plans on April 18 at the Shanghai Auto show.
From the Oct. 24 low of 12.52, LI stock more than doubled to 27.48 on Feb. 2. Shares consolidated, forging a double-bottom buy point of 25.46.
Li Auto stock rallied above the 200-day line and buy point on April 17 in above-average volume. Shares have fallen back, but LI has held the 200-day and the buy point.
Bottom line: LI stock is a buy.
NetEase is a China mobile gaming giant.
Q4 EPS fell 32% vs. a year earlier, while revenue dipped 4%.
After running from 53.09 in late October to 93.19 in late January,
NTES stock has forged an 18%-deep consolidation, mostly above the 50-day and 200-day lines, with a 93.29 buy point. Shares gapped above the 50-day line on March 23 and breaking a trendline, perhaps in reaction to gaming giant Tencent’s earnings. That offered an early entry.
But at this point, NetEase has a handle with a 91.29 buy point. NTES shares held up relatively well on April 12, then rebounded from the 21-day line the next day.
NTES stock broke out on April 17, but has retreated to just below the buy point.
Bottom line: NTES stock is not a buy, but it’s close.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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