QQQ   277.84 (+0.68%)
AAPL   115.81 (+1.51%)
MSFT   210.33 (+1.48%)
FB   261.90 (+0.04%)
GOOGL   1,465.60 (-0.03%)
AMZN   3,148.73 (+0.12%)
TSLA   429.01 (+2.37%)
NVDA   541.22 (+2.30%)
BABA   293.98 (+6.16%)
CGC   14.32 (-1.24%)
MU   46.96 (-7.39%)
GE   6.23 (+1.80%)
AMD   81.99 (+0.27%)
T   28.51 (+0.74%)
F   6.66 (+0.91%)
ACB   4.65 (-0.64%)
GILD   63.19 (+1.76%)
NFLX   500.03 (+1.33%)
DIS   124.08 (-1.05%)
BA   165.26 (+1.01%)
BAC   24.09 (+1.35%)
QQQ   277.84 (+0.68%)
AAPL   115.81 (+1.51%)
MSFT   210.33 (+1.48%)
FB   261.90 (+0.04%)
GOOGL   1,465.60 (-0.03%)
AMZN   3,148.73 (+0.12%)
TSLA   429.01 (+2.37%)
NVDA   541.22 (+2.30%)
BABA   293.98 (+6.16%)
CGC   14.32 (-1.24%)
MU   46.96 (-7.39%)
GE   6.23 (+1.80%)
AMD   81.99 (+0.27%)
T   28.51 (+0.74%)
F   6.66 (+0.91%)
ACB   4.65 (-0.64%)
GILD   63.19 (+1.76%)
NFLX   500.03 (+1.33%)
DIS   124.08 (-1.05%)
BA   165.26 (+1.01%)
BAC   24.09 (+1.35%)
QQQ   277.84 (+0.68%)
AAPL   115.81 (+1.51%)
MSFT   210.33 (+1.48%)
FB   261.90 (+0.04%)
GOOGL   1,465.60 (-0.03%)
AMZN   3,148.73 (+0.12%)
TSLA   429.01 (+2.37%)
NVDA   541.22 (+2.30%)
BABA   293.98 (+6.16%)
CGC   14.32 (-1.24%)
MU   46.96 (-7.39%)
GE   6.23 (+1.80%)
AMD   81.99 (+0.27%)
T   28.51 (+0.74%)
F   6.66 (+0.91%)
ACB   4.65 (-0.64%)
GILD   63.19 (+1.76%)
NFLX   500.03 (+1.33%)
DIS   124.08 (-1.05%)
BA   165.26 (+1.01%)
BAC   24.09 (+1.35%)
QQQ   277.84 (+0.68%)
AAPL   115.81 (+1.51%)
MSFT   210.33 (+1.48%)
FB   261.90 (+0.04%)
GOOGL   1,465.60 (-0.03%)
AMZN   3,148.73 (+0.12%)
TSLA   429.01 (+2.37%)
NVDA   541.22 (+2.30%)
BABA   293.98 (+6.16%)
CGC   14.32 (-1.24%)
MU   46.96 (-7.39%)
GE   6.23 (+1.80%)
AMD   81.99 (+0.27%)
T   28.51 (+0.74%)
F   6.66 (+0.91%)
ACB   4.65 (-0.64%)
GILD   63.19 (+1.76%)
NFLX   500.03 (+1.33%)
DIS   124.08 (-1.05%)
BA   165.26 (+1.01%)
BAC   24.09 (+1.35%)
Log in

3 Stocks with Significant China Risk Exposure

Wednesday, June 24, 2020 | Sean Sechler
3 Stocks with Significant China Risk Exposure

With the recent headlines about the U.S.-China trade deal, it’s probably a good time for investors to reassess the status of major companies with significant China risk exposure. The trade deal with China has already caused several major market moves, and although it appears Phase 1 of the deal is intact, it remains to be seen if both countries can agree to Phase 2. In a market where one trade-tension headline can greatly impact your positions, it’s definitely a good idea to understand which companies are vulnerable.

In a perfect world, the United States and China will be able to work out their differences and the previously announced trade deal will move forward smoothly. However, we have already witnessed some mixed messages from the government and it is clearly evident how much of an impact any setbacks will have on financial markets. That doesn’t mean that you should sell every one of your stocks with China risk exposure, but the more you understand which businesses are exposed to these types of headlines the better your decision-making process will be. Let’s take a look at 3 stocks with significant China risk exposure below.

Nike (NYSE:NKE)

When you look at a company like Nike, which is a global brand that generates a ton of international revenue each year, it’s easy to see why it has been rallying strongly after the coronavirus crash in March. Thanks to solid growth in e-commerce and a reputation for being one of the strongest brands in retail, Nike is nicely positioned to continue its growth in both the U.S. and abroad.

Part of the reason why Nike has become such a retail powerhouse has to do with its expansion into China. In fact, China has been one of the biggest growth drivers for Nike. The company earned $1.5 billion in Q3 revenue from Greater China, which represented roughly 15% of its overall revenue figure. This puts Nike at risk should there be any setbacks in the trade deal, as China would likely enforce additional tariffs in retaliation. Many of Nike’s products are imported into the United States from China, which means those imports would get a lot more expensive for the company.

Starbucks (NASDAQ:SBUX)

Another iconic brand with significant revenue exposure to China is Starbucks. This is a company that has grown its stores in China steadily over the last few years, especially after growth in the U.S. consumer market slowed down. Currently, Starbucks operates 4,400 stores in 168 cities in mainland China and is expecting to add 500 new stores by the end of its current fiscal year. The company continues to spend heavily in China and announced that it is investing an additional $130 million to open a state of the art roasting facility there.

If trade tensions subside, Starbucks is poised to capitalize nicely and continue receiving strong revenue from China. However, should the situation deteriorate, investors should understand that Starbucks will be left vulnerable. There’s even a possible scenario where Chinese citizens boycott U.S. brands as a result of tensions between the countries, which would prove quite costly for the company.

Wynn Resorts (NASDAQ:WYNN)

Many of the hotel stocks that have locations in China are clearly exposed to revenue risk should the trade deal take a turn for the worst, but Wynn Resorts just might be the most vulnerable. Wynn actually receives the majority of its revenue from China’s gambling capital, Macau. In 2019, Macau operations accounted for $4.6 billion out of its $6.6 billion in annual operating revenue. If there are issues with Macau, Wynn Resorts will have to deal with substantial negative effects on their cash flow and profits.

The main problem here has to do with gaming license renewals. The permits for Wynn’s Macau casinos will expire in 2022. If trade tensions between the US and China increase, it could impact the gaming license renewal process for Wynn. We’ve already seen the negative impact on Wynn’s earnings during the time its Macau casinos were closed due to the pandemic, which is proof that this stock has substantial risk if the trade deal eventually falls apart.

Geopolitical Tensions Subsided for Now

For now, it appears that the Phase 1 trade deal is still fully intact which is good news for both stocks and the global economy. However, any setbacks with the existing deal can result in downside for financial markets, especially during a time when both of the world’s leading economies are in a fragile state. During a period of so much uncertainty in the markets, investors should always understand the risk exposure to China that stocks like Nike, Starbucks, and Wynn Resorts are vulnerable to.

Companies Mentioned in This Article

CompanyBeat the Market™ RankCurrent PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
Wynn Resorts (WYNN)1.7$71.81+1.2%N/A-6.87Buy$108.60
Starbucks (SBUX)2.4$85.92+1.3%1.91%77.41Buy$84.42
Nike (NKE)2.0$125.54-0.6%0.78%79.46Buy$133.49
Compare These Stocks  Add These Stocks to My Watchlist 

7 Stocks That Could Provide a Year-End Rally

It’s rough in the markets right now. Underlying the volatility is uncertainty. The VIX Index (INDEXCBOE: VIX) otherwise known as the Fear Index is unofficial, but an eerily accurate predictor of market sentiment. And the VIX is up 30% in the last month.

Is this uncertainty due to concerns over additional lockdown measures? Is it about the lack of additional coronavirus stimulus? Is the market reacting to a surge in jobless claims? Or is this just the somewhat normal volatility that comes in an election year that promises to be like none in American history.

The answer is all of the above and then some. But does that mean you should stay out of equities? I don’t think so. Where are you going to go? The Fed has promised interest rates are going nowhere fast. And that bit of news is weighing down the bond market.

So stocks it is. But although growth-seeking investors may be tempted to look at the tech sector to see what’s on sale today, I suggest taking a more targeted approach. Rather than looking at a single sector, try to look at solid performers in different sectors that may be ready to surge over the last three months.

The pandemic brought the entire market down. But once investors took a breath they found bargains. And if you had the courage to put your money to work in those stocks, you’ve been rewarded.

Times like these call for the same type of courage. And that’s why we’ve put together this special presentation with seven stocks that look ready to surprise investors with nice end-of-year gains.

View the "7 Stocks That Could Provide a Year-End Rally".

Enter your email address below to receive a concise daily summary of analysts' upgrades, downgrades and new coverage with MarketBeat.com's FREE daily email newsletter.