Breaking News
0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Forget Alibaba, Buy These 5 Chinese Stocks Instead For 2019

By Zacks Investment ResearchStock MarketsDec 26, 2018 08:26PM ET
www.investing.com/analysis/forget-alibaba-buy-these-5-chinese-stocks-instead-for-2019-200371245
Forget Alibaba, Buy These 5 Chinese Stocks Instead For 2019
By Zacks Investment Research   |  Dec 26, 2018 08:26PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

Trade wars are considered headwinds for companies as these erode profit margins and affect the overall economy. Thus, the rising trade war between the United States and China has impacted Alibaba Group Holding Limited (NYSE:BABA) .

Despite Alibaba’s strong first half of 2018, the China-based e-commerce giant was fettered by this trade war, in turn increasing expenses and slowing economy in the second half of 2018.

Alibaba’s stock has risen more than 100% over the past three years. But unfortunately, this U.S.-China trade war has taken a toll on Alibaba, hitting its share price largely.

This Zacks Rank #3 (Hold) stock has been lagging the S&P 500 Index and the industry it belongs to over the past year.

Shares of Alibaba have plunged 22.5% on a year-to-date basis compared with the S&P 500’s decline of 12% and the broader sector’s fall of 13.9%.

What’s Giving Alibaba a Tough Time?

Revenues, which had been expanding over the past three years, continued its momentum in the first half of 2018 but started their downward journey in later half of 2018. The bottom line also remained under pressure in 2018.

Lackluster results were an outcome of the company’s heavy spending in new areas of core online retail business, with investments in supermarkets, stores, new artificial intelligence, digital entertainment, along with cloud computing businesses. Not only this, Alibaba’s expansion efforts outside China also remain a major culprit behind its dip in profitability.

China's biggest e-commerce firm warned that profits will continue to be impacted by investments in new businesses, partly due to the consolidation of Koubei and expenses related to its newly-created local services unit.

Moreover, U.S.-China trade tensions and other political worries have continued to weigh on Alibaba's domestic as well as international growth, and have caused the company's shares to retreat so far this year.

In addition to all these, Alibaba cuts a sorry figure on the earnings front as well. In the past 60 days, six analysts have downwardly revised earnings estimates for fiscal 2019. As a result, the Zacks Consensus Estimate has moved south to stand at $5.20.

Given the headwinds faced by the company, we believe that the stock will remain under pressure in the coming quarters as well.

Will the Stock Regain Momentum?

Although results show that increased spending on a number of growth initiatives on retail and cloud computing taken by management are slowly taking off, we must wait and see the positive effects of the same in the underwriting results.

Alibaba’s cloud computing has significant growth opportunities, driven by robust product portfolio, strengthening IoT capabilities and key offerings. Given the growing position of the company’s cloud business in China and aggressive international expansion strategies, we believe that cloud computing will be one of the major growth drivers in the long run.

The online giant is also well poised to benefit from the growing demand for videos across its platform. The company has been flexing its video content muscles with numerous licensing deals. These deals are another sign that Alibaba is willing to spend plenty of cash on its entertainment and media units, which management has identified as key growth drivers outside of core e-commerce business.

Coming to the numbers, Alibaba's cloud business grew 90% year over year to 5.67 billion RMB ($825 million), and media and entertainment was up 24% to 5.94 billion RMB ($865 million)in the last reported quarter.

While these measures seem impressive, the same may take a while before they start paying off completely. Hence,it is advisable to steer clear of Alibaba as of now.

Our Picks

Though Alibaba's prospects may not appear appealing at the moment, we have highlighted five Chinese stocks that hold promise for investors. All these stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Vipshop Holdings Limited (NYSE:VIPS) is an online discount retailer for brands. The company offers branded products to consumers in China through flash sales on its vipshop.com website. This Zacks Rank #2 stock has declined 53.5% year to date.

The Zacks Consensus Estimate for the stock’s earnings for the current year has been revised 3.6% upward over the past 60 days. It currently carries a Value Style Score of B.

Headquartered in Shanghai, OneSmart International Education Group Limited (NYSE:ONE) provides tutoring services for kindergarten as well as primary, middle, and high schools in the People’s Republic of China.

This Zacks Rank #2 stock has declined 30.6% year to date. In the past 60 days, the consensus estimate for earnings has moved up 12.5% for the current year.

Autohome Inc. (NYSE:ATHM) offers an online destination for automobile consumers, primarily in the People's Republic of China. The company delivers content to automobile buyers and owners through its Websites, autohome.com.cn and che168.com.This Zacks Rank #2 stock has increased 20.5% year to date.

The Zacks Consensus Estimate for the stock’s earnings for the current year has been revised 0.9% upward over the past 60 days.

Taoping Inc. (NASDAQ:TAOP) is a cloud-based ad terminal and service provider of a digital advertising distribution network. In addition, it is a media resource sharing platform in the out-of-home advertising market, primarily based in China. This Zacks Rank #2 stock has declined 29% year to date.

The Zacks Consensus Estimate for the stock’s earnings for the current year has been revised upward over the past 60 days. It currently carries a Value Style Score of A.

Four Seasons Education (Cayman) Inc. (NYSE:FEDU) offers after-school mathematics and online education services for elementary school students. This Zacks Rank #2 stock has declined 69% year to date.

The Zacks Consensus Estimate for the stock’s earnings for the current year has been revised 4.5% upward over the past 60 days. It currently carries a Value Style Score of B.

In addition to the stocks discussed above, would you like to know about our 10 top tickers to buy and hold for the entirety of 2019?

These 10 are painstakingly handpicked from over 4,000 companies covered by the Zacks Rank. They are our primary picks poised to outperform in the year ahead. Be among the first to see the new Zacks Top 10 Stocks >



Alibaba Group Holding Limited (BABA): Free Stock Analysis Report

Autohome Inc. (ATHM): Free Stock Analysis Report

Vipshop Holdings Limited (VIPS): Free Stock Analysis Report

OneSmart International Education Group Limited (ONE): Free Stock Analysis Report

China Information Technology, Inc. (TAOP): Free Stock Analysis Report

Four Seasons Education (Cayman) Inc. Unsponsored ADR (FEDU): Free Stock Analysis Report

Original post
Forget Alibaba, Buy These 5 Chinese Stocks Instead For 2019
 

Related Articles

Al Brooks
Emini Weak After June FOMC By Al Brooks - Jun 18, 2021

Emini Daily Chart– Fell below Wednesday’s low, but reversed up and closed just above open. – Yesterday is an Emini High 1 buy signal bar, but after two big bear days, and without a...

Forget Alibaba, Buy These 5 Chinese Stocks Instead For 2019

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email