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7 Valuable China Stocks That May Get Delisted in 2020

7 Valuable China Stocks That May Get DelistedPosted on Monday, June 29th, 2020 by MarketBeat Staff

As if investors didn’t have enough to think about in 2020, tensions between the United States and China are continuing to flare up. One of the issues, of course, is the “what did they know and when did they know it” events surrounding the novel coronavirus. There are also issues surrounding global supply chains and the fate of 5G networking.

But another issue that should be drawing the concern of investors is the threat of Chinese stocks being delisted from American exchanges. On Friday, June 26 Luckin Coffee was delisted from the NASDAQ. The company had been in hot water since reports early this year that it had credited itself with thousands of phantom sales.

But that isn’t the reason for the delisting. The reality is that Chinese companies don’t abide by the same agreed upon accounting standards as American companies. And that can make it harder for investors to get an accurate picture of what is going on with their business at a given moment. However, like most issues between the two countries, it’s not as simple as that. There are Chinese companies that are considering voluntarily and unilaterally removing themselves from American exchanges and list on the Hong Kong or Shanghai exchanges.

While neither of these moves would mean that U.S. investors would be prohibited from trading these stocks, it could make it more difficult.

U.S. relations with China will be an issue during this election year, and likely beyond. It would be well worth your time and attention to pay careful attention to your current or planned exposure to these China stocks.

#1 - Alibaba (NYSE:BABA)

Alibaba Group logo

Alibaba (NYSE:BABA) is probably the most well-known Chinese stocks. Alibaba is primarily listed on the New York Stock Exchange, and has a secondary listing on the Hong Kong Stock Exchange. The company’s initial public offering (IPO) raised approximately $13.8 billion that included the issuance of 500 million new ordinary shares. However, the new offering only diluted BABA’s total shares by less than 3%.

It is colloquially, but perhaps too conveniently, labeled as the Amazon of China. But that minimizes what Alibaba really does. Rather, Alibaba combines many of these companies' core competencies in a single company that has a market cap of just under five trillion dollars.

For its part, Alibaba management has stated that the company prepares and presents its financial statements in accordance with U.S. accounting standards. And investors know that Alibaba stock will continue to trade on the NASDAQ exchange for several years, even if the United States passes a bill to have the stock delisted. That being said, it’s hard to see Alibaba fully opening the company’s books to U.S. regulators.

About Alibaba Group
Alibaba Group Holding Limited, through its subsidiaries, operates as an online and mobile commerce company in the People's Republic of China and internationally. The company operates in four segments: Core Commerce, Cloud Computing, Digital Media and Entertainment, and Innovation Initiatives and Others. Read More 

Current Price: $223.60
Consensus Rating: Buy
Ratings Breakdown: 26 Buy Ratings, 1 Hold Ratings, 0 Sell Ratings.
Consensus Price Target: $247.10 (10.5% Upside)



#2 - JD.com (NASDAQ:JD)

JD.Com logo

JD.com (NASDAQ:JD) is the second largest name in Chinese e-commerce. And like Alibaba, JD recently completed its IPO on the Hong Kong Stock Exchange. The offering was for 133 million new ordinary shares. The company raised $3.9 billion for the sale which is expected to dilute the company’s stock by up to 5%.

JD has not publicly commented about the potential delisting in the United States. However, the company has filed an IPO for the U.S. online grocery affiliate, Dada Nexus. This leads many to believe the company is not looking to walk away from its U.S. listing.

Like many companies both in the U.S. and China, JD.com suffered an initial hit on concerns about how much discretionary spending would be lost as a result of the novel coronavirus. But if the results of the company’s 618 Grand Promotion is any indication there is little for investors to be concerned about. 

In May, JD.com forecasted net revenue to grow by 20% to 30% year-over-year in July, August and September.

About JD.Com
JD.com, Inc, through its subsidiaries, operates as an e-commerce company and retail infrastructure service provider in the People's Republic of China. It operates in two segments, JD Retail and New Businesses. The company offers home appliances; mobile handsets and other digital products; desktop, laptop, and other computers, as well as printers and other office equipment; furniture and household goods; apparel; cosmetics, personal care items, and pet products; women's shoes, bags, jewelry, and luxury goods; men's shoes, sports gears, and fitness equipment; automobiles and accessories; maternal and childcare products, toys, and musical instruments; and food, beverage, and fresh produce. Read More 

Current Price: $61.39
Consensus Rating: Buy
Ratings Breakdown: 19 Buy Ratings, 4 Hold Ratings, 0 Sell Ratings.
Consensus Price Target: $54.40 (-11.4% Upside)



#3 - NetEase (NASDAQ:NTES)

NetEase logo

A third Chinese company that has recently completed an IPO to trade on the Hong Kong Stock Exchange is NetEase (NASDAQ:NTES).  The offering, which netted the company $2.7 billion, was expected to dilute NTES shares by approximately 5%. NetEase is China’s second largest gaming company, but the largest that is listed on a major U.S. exchange.

The IPO is said to be used to accelerate its international expansion. NetEase Chief Executive Officer (CEO) William Ding said the Hong Kong IPO was a sign that NetEase was “returning to a market in which we share a closer mutual understanding.” That was undoubtedly a veiled critique of U.S. regulators. However, there’s more to that story. In 2001, NetEase was almost delisted from the NASDAQ. The company was the subject of fraud allegations and missing an annual report.

However, like JD.com, NetEase has recently spun off Youdao (NYSE:DAO) its online education unit which suggests they are not looking to leave the U.S. exchanges.

About NetEase
NetEase, Inc operates an interactive online community in the People's Republic of China. The company operates in four segments: Online Games Services, E-Commerce, Advertising Services, and Innovative Businesses and Other Services. It offers various games in a range of genres through mobile devices and PCs, including role-playing games, MMORPGs, battle arena games, simulation games, collectible card games, first-person shooter games, sandbox games, and other types of games to the Chinese market. Read More 

Current Price: $430.91
Consensus Rating: Buy
Ratings Breakdown: 12 Buy Ratings, 1 Hold Ratings, 0 Sell Ratings.
Consensus Price Target: $399.97 (-7.2% Upside)



#4 - Baidu (NASDAQ:BIDU)

Baidu logo

By now, you’ve noticed that tech is a theme of this presentation. And Baidu (NASDAQ:BIDU) certainly fits into that category. Now, unlike many of the stocks in this presentation, Baidu is down over 10% for the year. To understand why, you have to be familiar with the nature of Baidu’s business.

They are the premier online search engine in China, controlling nearly two-thirds of the online search market. But they don’t stop there. The company is also the country’s third largest online ad platform.

They offer Chinese and Japanese language searches through its DuerOS virtual assistant, web-based marketing services, and have even expanded into the development of autonomous vehicles.

Plus the company is seeing growth in daily active users on its mobile app. And that means that the company’s search engine is expanding beyond PCs.

However, Baidu faces intense competition within its own country. Alibaba, Tencent and Bilibili (NASDAQ:BILI) are all encroaching on its advertising revenue.

About Baidu
Baidu, Inc provides Internet search services in China and internationally. It operates through two segments, Baidu Core and iQIYI. The Baidu Core segment offers products for uses, including Baidu App to access search, feed, and other services using mobile devices; Baidu Search to access its search and other services through its other properties and Union partners; Baidu Feed that provides users with personalized timeline based on their demographics and interests; Haokan, a short video app; and Quanmin, a flash video app for users to create and share short videos. Read More 

Current Price: $123.30
Consensus Rating: Buy
Ratings Breakdown: 17 Buy Ratings, 7 Hold Ratings, 0 Sell Ratings.
Consensus Price Target: $145.17 (17.7% Upside)



#5 - Bilibili (NASDAQ:BILI)

Bilibili logo

Speaking of Bilibili (NASDAQ:BILI), BILI stock is up over 100% for the year. Like a lot of Chinese companies, it seems that analysts can’t help but call companies, “the Chinese version of (fill-in the blank.”

Some of these are a stretch (see Alibaba), but in the case of Bilibili calling it “the YouTube of China” is apt. The one exception is that BILI caters to a younger core audience. This is reflected in its heavy dosage of anime cartoons.

And the stock is up because Chinese consumers have been stuck at home. And these consumers have flooded to platforms such as Bilibili. And as the platform draws more customers, it also draws more subscription dollars and ad revenue.

In May, Bilibili missed on earnings, but by every other meaningful metric delivered a stellar report. They brought in revenue of $327 million that was 69% higher than the same period in the year prior. Average month active users (MAUs) showed a 70% YOY increase as did average monthly active mobile users which were up 77%. And in the all-important average monthly paying users, the company also saw a 134% YOY increase.

About Bilibili
Bilibili Inc provides online entertainment services for the young generations in the People's Republic of China. It offers a platform that covers a range of genres and media formats, including videos, live broadcasting, and mobile games. Bilibili Inc has a strategic collaboration agreement with Tencent Holdings Limited for sharing and operating existing and additional anime and games on its platform in China. Read More 

Current Price: $48.18
Consensus Rating: Buy
Ratings Breakdown: 10 Buy Ratings, 0 Hold Ratings, 0 Sell Ratings.
Consensus Price Target: $30.99 (-35.7% Upside)



#6 - Pinduoduo (NASDAQ:PDD)

Pinduoduo logo

Pinduoduo (NASDAQ:PDD) has an odd business model, but it might just be odd enough to be an absolute genius idea in these socially distant time. Let’s just say it makes e-commerce a collaborative experience.

The company allows online shoppers to invite a group of friends or followers to join them. In turn the group gets bulk-buying discounts on certain items. It’s a combination of Instagram meets Groupon I suppose, but it’s obviously working for Pinduoduo. The company has 628.1 million active buyers and posted an increase of 76% in its transaction revenue in its most recent quarter.

The success of PDD gets even better when you consider that it took Alibaba 15 years to reach 500 million active buyers. However, some of that could be explained by Alibaba creating a market that Pinduoduo is happily participating in.

PDD stock is up over 100% in 2020 with virtually all of that growth coming after April 1. This suggests that the company is continuing to post strong numbers even after the Chinese lockdown measures ended.

About Pinduoduo
Pinduoduo Inc operates an e-commerce platform in the People's Republic of China. It also operates Pinduoduo, a mobile platform that offers a range of priced merchandise. The company was formerly known as Walnut Street Group Holding Limited and changed its name to Pinduoduo Inc in July 2018. Pinduoduo Inc was founded in 2015 and is based in Shanghai, the People's Republic of China.

Current Price: $93.00
Consensus Rating: Hold
Ratings Breakdown: 6 Buy Ratings, 8 Hold Ratings, 2 Sell Ratings.
Consensus Price Target: $64.15 (-31.0% Upside)



#7 - China Mobile (NYSE:CHL)

China Mobile logo

Up to this point, we’ve been taking a look at growth stocks. But to close this presentation, let’s take a look at China Mobile (NYSE:CHL). To understand the allure of this company, consider the fact that the Chinese mobile market includes 946 million customers. That user base is almost three times larger than the entire population of the United States.

And that number, as massive as it is, is also the reason why CHL is not a growth pick. The stock is probably near a saturation point. But the company will find ways to get at least nominally more revenue from existing users through measures like more expensive data plans and expanded services.

But like many U.S. telecom stocks, customers can look at China Mobile for its dividend which currently stands at an eye-popping 8.69%.

However, China Mobile makes this list because it is firmly controlled by the Chinese government. And if the current legislation in the U.S. Congress becomes law, then CHL will automatically be marked for delisting because the government’s stake would disqualify it from being listed on a U.S. exchange.

About China Mobile
China Mobile Limited provides mobile telecommunications and related services in Mainland China and Hong Kong. The company offers local calls; domestic and international long distance calls and roaming services; and value-added services, such as caller identity display, call waiting, conference calls, and others. Read More 

Current Price: $34.91
Consensus Rating: Buy
Ratings Breakdown: 3 Buy Ratings, 1 Hold Ratings, 0 Sell Ratings.
Consensus Price Target: N/A

 

Chinese companies that are listed on American exchanges have a market value of over $1.3 trillion. And although none of these stocks are part of the S&P 500 (a common measuring stick), they still are becoming a staple in many portfolios.

The good news for investors is that even if one or more of these stocks is delisted, it won’t happen overnight. In fact, it will be several years before the stocks will get dropped from the exchange. And to be honest, it may not happen at all.

So, is it likely to happen? If I had the answer to that, I could be a wealthy man. The bill has passed the U.S. Senate. But the House of Representatives is pledging “a rigorous debate” that the bill did not receive in the Senate.

Rigorous debate in Washington-speak means it could very well be tabled until after the election. And even if it does get passed before, there’s no telling if President Trump would actually sign the bill into law.

I only walk you through this exercise to remind you that China is an issue that most politicians really don’t want to touch. But as an investor, this is an issue that you must continue to pay attention to, particularly if your portfolio has exposure to China stocks.

5 Oil Stocks That May Not Survive the Current Crisis

What would you think of the long-term prospects of a business that paid you to buy their products? That’s an oversimplification of what occurred to the May futures contract for oil on April 20. The price for that contract sold for a negative price for the first time in history.

The crisis befalling the oil companies at this time can best be described as “only the strongest survive.” There’s just no way the oil companies can possibly handle month after month of rock-bottom oil prices.

The problem is almost comically simple to understand. There is a massively reduced demand for oil as millions of Americans are following mitigation orders ranging from social distancing guidelines to more restrictive shelter in place orders. At the same time, the market is trying to absorb the oversupply of oil that came from Russia and Saudi Arabia.

However, when the year started, things looked like it might be business as usual for oil producers. The U.S. economy was humming along and there was talk that the second half of the year might finally bring the boost to oil prices that many companies badly needed.

However, since the middle of February, the bottom has dropped out of the market in general, and oil prices have been one of the main sectors to feel the impact.

Initially, investors tried to remain optimistic. A month ago, investors thought that the economy might be reopening sooner rather than later. However, the exact timing of the reopening is about as fluid as a barrel of oil. And with it looking more likely that there will be more demand destruction at least through May, there’s very little to prop up the stock of any oil companies.

And that means that, in all likelihood, there will not be room left for some oil companies. We’ve highlighted five oil stocks that have a strong probability of not surviving the chaos surrounding the coronavirus and our nation’s response.

View the "5 Oil Stocks That May Not Survive the Current Crisis" Here.






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