The global market in  digital transformation is expected to see a CAGR of 18.5% between 2020 and 2025. And the pace of automation in China is the world’s  fastest. Given the country’s manufacturing cost advantage in the global markets, its tech companies have the potential to grow exponentially with rising international demand for their products and services.

However, China’s proposed anti-monopolistic regulations to cover the internet industry are expected to hurt tech giants such as Alibaba Group Holding Limited (BABA), Tencent Holdings Limited (TCEHY) and JD.com, Inc. (JD). So, we believe, the nation’s smaller tech players should benefit from taking chunks of market share from these giants.

The unique offerings and financial flexibility of lesser-known Chinese companies like JOYY, Inc. (YY), Sina Corporation (SINA), and Renren, Inc. (RENN) position them well to benefit significantly from both the country’s rapid automation and likely limits to be placed on tech giants.

JOYY, Inc. (YY)

YY runs an online social media platform in China. The platform allows users to engage in real-time activities involving text, video, and voice. YY’s stock has gained 40.3% over the past year.

YY  recently entered an agreement with Baidu, Inc. (BIDU) to sell its live streaming business for approximately $3.6 billion. The sale will include the YY mobile app, YY.com website, along with PC YY.

For the quarter ended September 30, 2020, the company saw an increase in revenue of 36.1% versus the same period last year. The company’s non-GAAP net income has  increased 64% during the same period.

YY is expected to see a revenue growth of 12.2% in 2021. Its  EPS is estimated to grow 35.4% in 2021 and at a rate of 3.5% per annum over the next five years.

How does YY stack up for the POWR Ratings?

A for Trade Grade

B for Peer Grade

B for Industry Rank

B for Overall POWR Rating

The stock is ranked #24 of 103 stocks in the China industry.

Sina Corporation (SINA)

SINA runs as an online media company in China. The company operates primarily SINA.com, an online brand advertising portal. SINA’s stock has returned 30% over the past nine months.

SINA recently announced that it will merge with  New Wave Holdings Ltd, which provides entertainment services. The merger implies an equity value of $2.59 billion for SINA.

For the quarter ended June 30,  2020, the company saw a 16%  increase in non-advertising revenue versus  the same period last year. Its advertising gross margin during the quarter grew to 82% compared to 80% during the previous year.

SINA’s revenue is estimated to increase 6.1% for the quarter ended December 31, 2020 and 9.8% in 2021. Its  EPS is expected to rise 19.4% in 2021 and 2.1% per year over the next five years.

SINA’s strong fundamentals are reflected in its POWR Ratings. It has a “Buy” rating with an “A” for Buy & Hold Grade, and a “B” for Trade Grade, Peer Grade and Industry Rank. It is ranked #27 of 103 stocks in the China industry.

Renren, Inc. (RENN)

RENN runs an online social networking platform in China. The company also provides online gaming services. RENN’s stock has gained 214.4% over the past year.

RENN’s subsidiary, Kaixin, which is a premium used auto business, recently initiated legal proceedings against three of its dealers. If the lawsuit is resolved in Kaixin’s favor, it could  benefit the company significantly.

For the six months ended June 2020, RENN  reduced its marketing expenses by 58.5% versus  the same period last year. Its research and development expenses also decreased 39.5% during that period.

It is no surprise that RENN has a “Buy” rating in our POWR Ratings systems with a grade of “B” in Trade Grade, Peer Grade, and Industry Rank. In the 103-stock China industry, RENN is ranked #35.

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YY shares were trading at $90.62 per share on Friday morning, down $0.61 (-0.67%). Year-to-date, YY has gained 13.30%, versus a 2.39% 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...

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