Exploring Investment Potential: Three Chinese Stocks Worth Considering

Chinese stocks are currently out of favor with many U.S. investors, particularly due to ongoing trade tensions and regulatory challenges. However, overlooking opportunities in one of the world’s largest economies might be a mistake.

I believe there are valuable investment prospects in the Chinese market. If you’re reading this, you may share that sentiment. China’s vast economy offers quality investments that come with lower valuations due to current market fears.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. See the 10 stocks »

As we head into the new year, I’m holding several Chinese stocks, including Baidu (NASDAQ: BIDU), Alibaba Group (NYSE: BABA), and Qifu Technology (NASDAQ: QFIN).

1. Baidu

Baidu has been China’s leading search engine for years, but it has branched out into areas like autonomous driving, artificial intelligence, and robotics. Despite being at the forefront of technology, Baidu has struggled to grow its revenue consistently, recording just one year of double-digit revenue gains since 2018. In fact, shares of Baidu fell 29% last year, making it the only stock on this list to see a decline in 2024.

Image source: Getty Images.

Looking ahead, there is potential for recovery. Baidu has recently reported several quarters of better-than-expected earnings, contrary to its latest report. Its shares are currently trading for less than eight times trailing adjusted earnings. With a market cap of $28.5 billion, Baidu’s enterprise value drops to $23.4 billion. Its revenue of $18.3 billion translates to an attractive enterprise value of just 1.3 times its revenue, indicating it could be a strong financial performer at a low price point.

2. Alibaba

Alibaba is synonymous with e-commerce in China and has seen significant revenue growth over the years, increasing over 250-fold since it turned Singles Day into a national shopping holiday in 2009. However, growth has slowed, with just one quarter of double-digit top-line growth over the past twelve reports. The company faces stiff competition from discount rivals such as Shein and PDD Holdings.

Despite these challenges, Alibaba is restructuring by selling off nonessential assets to strengthen its core operations. Revenue and earnings growth are expected to pick up in its upcoming fiscal year, which begins in April. Currently, Alibaba is trading at just nine times forward adjusted earnings and offers a 2.5% yield through semiannual dividends. Positioned to reclaim market share, Alibaba may be an attractive option for patient investors.

3. Qifu Technologies

Qifu Technologies, though the smallest of the three, sports a market cap of $5.6 billion and trailing revenue of $2.3 billion. It offers credit solutions to 55.2 million users through partnerships in the financial services sector, utilizing proprietary AI credit assessment tools.

The company’s focus lies in serving consumers and small businesses often overlooked by larger lenders. Notably, 70% of its borrowers are under 40 years old, with 81% coming from rural regions. Qifu has maintained profitability and recently initiated a share buyback program, successfully developing its stock, which more than doubled last year. Additionally, it offers a 3.3% yield for investors. With low forward profit multiples at six times, Qifu presents a compelling option.

Seizing the Opportunity: Potential for Growth

Missing the chance to invest in high-performing stocks can be disheartening. However, our analysts sometimes issue “Double Down” stock recommendations, signaling companies they believe are on the verge of significant gains. If you’ve felt like you missed out, now could be the time to act.

• Nvidia: If you invested $1,000 when we doubled down in 2009, you’d have $352,417!
• Apple: If you invested $1,000 when we doubled down in 2008, you’d have $44,855!
• Netflix: If you invested $1,000 when we doubled down in 2004, you’d have $451,759!

Currently, we are issuing “Double Down” alerts for three exceptional companies that may not offer another opportunity like this anytime soon.

See 3 “Double Down” stocks »

*Stock Advisor returns as of January 6, 2025

Rick Munarriz has positions in Alibaba Group, Baidu, and Qifu Technology. The Motley Fool has positions in and recommends Baidu. The Motley Fool recommends Alibaba Group. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.