PDD: 3 Best Chinese Growth Stocks to Buy in December

The Chinese stock market has been bullish for the last three weeks. China’s economy is recovering quickly from the challenges posed by the COVID-19 pandemic. This, along with a significant growth in China’s manufacturing sector, has been motivating investors to bet more on stocks.

Along with the recovery of China’s economy, 2020 has been a year for growth stocks in general, because many technology-first companies have disrupted traditional companies. Chinese growth stocks have seen stellar gains so far this year, a trend is likely to continue going into 2021.

Companies like Pinduoduo, Inc. (PDD - Get Rating), NetEase, Inc. (NTES - Get Rating), and Bilibili, Inc. (BILI - Get Rating) are growing in emerging sectors such as e-commerce and social media, and making investments in these high-growth areas. The shares of these companies have already delivered solid returns and are likely to keep moving higher in the upcoming months.

Pinduoduo, Inc. (PDD - Get Rating)

PDD operates an e-commerce platform that is based on third-party social media channels. It is the second largest online retailer in China based on the number of users and orders. PDD’s stock has gained 283.8% so far this year.

The company has recently launched Duo Duo Maicai, which is a grocery shopping platform, as an extension to its online retail services. The company has also announced its intention to invest in agricultural logistics infrastructure to better serve its customers.

The company’s revenue is expected to grow 86.2% for the quarter ended December 2020 and 55.4% in 2021. PDD’s EPS is expected to rise 170% for the quarter ended December 2020 and 290% in 2021.

How does PDD stack up for the POWR Ratings?

3 STOCKS TO DOUBLE THIS YEAR

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 #1 out of 115 stocks in the China industry.

NetEase, Inc. (NTES - Get Rating)

NTES operates an online interactive community. The company participates in the online gaming service, advertising, and e-commerce segments. NTES stock has gained 43.2% year-to-date.

The company recently initiated the sale of Kweichow Moutai, which is one of China’s most prestigious alcohol brands, through its online platform. This move could help NTES gain more market share in the alcohol e-commerce market. The company has also entered a strategic partnership with BMG. This partnership will give NTES access to BMG’s extensive music catalogue on its cloud music platform.

NTES’s revenue grew at a CAGR of 30.5% over the last five years. The company’s EBITDA grew at a CAGR of 5.2% over the last three years. The company’s revenue is expected to grow 34.5% for the quarter ended December 2020 and 18.1% in 2021. NTES’s EPS growth is estimated to be 14.9% in 2021 and 1.2% per annum over the next five years.

NTES’s strong fundamentals are reflected in its POWR Ratings. It has a “Buy” rating with an “A” for Trade Grade. It is ranked #14 out of 115 stocks in the China industry.

Bilibili, Inc. (BILI - Get Rating)

BILI is a social media company that operates a video sharing website. The website’s features include animation, comics, and games. BILI’s stock has risen 234.8% so far this year.

The company recently announced an equity investment in Huanxi Media Group, a leading media and entertainment company. The investment in Huanxi will allow BILI to enter the film and TV market. BILI has also entered a three-year partnership with Riot Games. This partnership will allow BILI to be the exclusive live broadcaster of League of Legends tournaments and games.

BILI’s revenue grew at a CAGR of 73.3% over the last three years. BILI’s revenue is estimated to grow 86.9% for the quarter ended December 2020 and 45.5% in 2021. The company’s EPS is expected to rise 37.4% in 2021.

It is no surprise that BILI is rated a “Strong Buy” in our POWR Ratings system and has a grade of “A” in Trade Grade, Buy & Hold Grade, and Peer Grade. In the 115-stock China industry, it is ranked #5.

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PDD shares were trading at $146.84 per share on Friday morning, up $1.68 (+1.16%). Year-to-date, PDD has gained 288.26%, versus a 16.23% 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...