In addition to logistical obstacles, the resurgence of COVID-19 cases in several parts of China has led to a further decline in Chinese stocks. Earlier this week, China’s financial hub, Shanghai, initiated a two-stage lockdown of its 26 million population. However, anticipated supportive government policies should catalyze a significant China-market rebound.
Earlier this month, the Chinese government tried to reassure concerned investors by promising support for the country’s struggling real estate industry and internet companies. Government officials have recommended that regulators issue market-friendly policies.
So, we think it could be wise to bet on fundamentally sound Chinese real estate stock Leju Holdings Limited (LEJU) and internet stock Phoenix New Media Limited (FENG), which are currently trading at discounts to their peers. These stocks are currently trading at less than $5.
Leju Holdings Limited (LEJU)
Headquartered in Beijing, LEJU provides online to offline (O2O) real estate services in the People’s Republic of China. It offers real estate e-commerce, online advertising, and online listing services through its online platform, which comprises websites that cover 391 cities.
On August 31, 2021, Geoffrey He, LEJU’s CEO, said, “We will continue to focus on platform construction and content creation and make efforts to improve user growth, optimize user experience and stickiness and further consolidate Leju’s influence among industry media.”
For its fiscal year 2021’s first six months, ended June 30, 2021, LEJU’s total net revenues came in at $301.09 million, up 7.6% year-over-year. The company’s E-commerce revenues were $231.40 million, up 12.6% year-over-year. And its cash and cash equivalents came in at $315.38 million for the period ended June 30, 2021, compared to $284.49 million for the period ended Dec. 31, 2020.
LEJU’s 0.15x forward P/S is 84.5% lower than the 0.98x industry average.
Analysts expect LEJU’s revenue to increase 6% to $642.30 million in 2022. Its EPS is estimated to increase 57.4% per annum for the next five years. Over the past month, the stock has gained 14% in price to close yesterday’s trading session at $0.67.
LEJU’s POWR Ratings reflect its solid prospects. The company has an overall B rating, which equates to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
In addition, it has a B grade for Value and Quality. LEJU is ranked #11 of 84 stocks in the China industry. Click here to see the additional POWR Ratings for LEJU (Growth, Stability, Momentum, and Sentiment).
Phoenix New Media Limited (FENG)
Headquartered in Beijing, FENG provides content on an integrated Internet platform in the People’s Republic of China. The company operates in two segments, Net Advertising Services, and Paid Services.
On March 15, 2022, Shuang Liu, FENG’s CEO, commented, “Going forward, we remain confident in the fundamentals of our business and will leverage the strength of our platform and our competitive advantages to continue driving growth in key strategic areas.”
FENG’s total revenues increased 23.8% sequentially to $47.53 million for the fourth quarter, ended Dec. 31, 2021. Its net advertising revenues increased 28.9% sequentially to $43.81 million. Furthermore, its gross profit came in at $16.54 million, up 17.2% sequentially.
FENG’s 0.26x trailing-12-month P/S is 84.4% lower than the 1.67x industry average.
Analysts expect FENG’s EPS to increase 5.3% per annum for the next five years. The stock has declined 24.5% in price over the past month to close yesterday’s trading session at $0.58.
FENG’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which indicates a Buy in our proprietary rating system.
It has an A grade for Value and a B grade for Sentiment. Within the China industry, it is ranked #9 of 68 stocks. To view the FENG ratings for Growth, Momentum, Stability, and Quality, click here.
What To Do Next?
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LEJU shares were trading at $0.72 per share on Wednesday afternoon, up $0.04 (+6.50%). Year-to-date, LEJU has declined -20.41%, versus a -3.00% rise in the benchmark S&P 500 index during the same period.
About the Author: Riddhima Chakraborty
Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries. More...
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