BIDU: 3 Chinese Growth Stocks to Buy in November

The Chinese economy is rebounding faster than other major economies of the world after the slump caused by the spread of the coronavirus. Growth in the Chinese economy is largely led by technology stocks that are helping to shape the new digital economy.

Technology stocks in China have largely performed well over the last year, with some stocks experiencing exponential growth. Investing in these high-growth stocks in November could lead to high gains for the rest of the year and beyond.

Baidu, Inc. (BIDU), NIO, Inc. (NIO), and Bilibili, Inc. (BILI) are at the cutting-edge of Chinese innovation. These companies are working on emerging technology such as artificial intelligence and electric vehicles that have the highest growth potential. These companies are expected to witness revenue and earnings growth in the future, which could translate into solid price momentum.

Baidu, Inc. (BIDU)

BIDU provides internet search services in China and internationally. The company’s search platform allows users to find websites, images, videos, and more. BIDU’s stock has gained 13.2% so far this year.

BIDU has recently launched the Xiaodu Smart Display X10, which is an AI-powered smart home device. This new product showcases BIDU’s commitment to be a leader in China’s technology space. The company has also launched a new social networking app called Youpu, which enables users to pick up new skills through mutual supervision.

During the quarter that ended June 30^th, 2020, the Baidu app saw 16 million new users in the last 12 months taking the total up to 204 million. Revenues from the company’s iQIYI and cloud and smart transportation services were up 18% year-over-year.

BIDU is expected to witness revenue growth of 6.2% for the quarter ending December 2020, and 13.5% in 2021. The company’s EPS is estimated to grow 19.2% in 2021, and at a rate of 0.9% per annum over the next five years.

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How does BIDU stack up for the POWR Ratings?

A for Trade Grade

A for Buy & Hold Grade

A for Peer Grade

B for Industry Rank

A for Overall POWR Rating

The stock is also ranked #2 out of 115 stocks in the China industry.

NIO, Inc. (NIO)

NIO develops, manufactures, and markets electric vehicles. The company operates the EP9, ES8, and EVE brands. NIO’s stock has gained 971.6% so far this year.

NIO recently developed and launched a 100-kWh battery that will hit the markets this month. This new battery will enable NIO cars to reach a range of 615 kms. The company has also launched a new battery subscription model which will allow purchasers to separate their car and battery costs. This will help drive more sales as users can now purchase and use NIO’s vehicles at a lower upfront cost.

During the quarter that ended June, 2020, the company delivered 10,331 cars which was an increase of 190.7% from the same period last year. The vehicle margin was 9.7% compared to -24.7% from the same period last year.

NIO is expected to witness revenue growth of 97.7% for the quarter ending December 2020, and 79.3% in 2021. The company’s EPS is estimated to grow 51.3% in 2020 and 32.9% in 2021.

It’s no surprise that NIO is rated a “Strong Buy” in our POWR Ratings system, with a grade of “A” in Trade Grade, Buy & Hold Grade, and Peer Grade. In the 115-stock China industry, it is ranked #3.

Bilibili, Inc. (BILI)

The company develops, runs, and markets a video sharing website. The themes of videos shared on the site include comics, games, and animation. BILI’s stock has gained 137.4% so far this year.

The company has recently made a significant equity investment of US$66 million in the Huanxi Media Group. This move will drive future collaboration between the two media companies and may lead to the development of further intellectual property relating to films and TV. The company has also entered into a three-year strategic partnership with Riot Games for the live broadcast of League of Legends games in China.

During the quarter that ended June 30^th, 2020, the company saw an increase in revenue of 70% compared to the same period last year. The number of average monthly users on their online platform increased 55%.

BILI is expected to witness revenue growth of 72.6% for the quarter ending December 2020, and 43.5% in 2021. The company’s EPS is estimated to grow 47.3% in 2021.

BILI’s strong fundamentals are reflected in its POWR Ratings. It has a “Buy” rating with an “B” in Trade Grade, Peer Grade, and Industry Rank. In the 115-stock China industry, it is ranked #19.

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BIDU shares were trading at $144.60 per share on Thursday morning, up $1.54 (+1.08%). Year-to-date, BIDU has gained 14.40%, versus a 11.80% rise in the benchmark S&P 500 index during the same period.

About the Author: Aaryaman Aashind

Aaryaman is an accomplished journalist that’s passionate about providing in-depth insights about investing and personal finance. Recently he has been focused on the stock market and he specializes in evaluating high-growth stocks. More...