The Chinese economy was expected to rebound strongly following the end of stringent Covid-19-led lockdowns. However, the recovery has been slower than anticipated and has adversely impacted investor sentiment on Chinese stocks. After a dismal 2023, Chinese stocks remain under pressure and started the year on a rough note, as companies continue to await robust stimulus measures by the government to spur domestic demand.
China’s property market crisis, growing deflationary risks, subdued demand, and rising trade tensions between the U.S. and China are expected to continue to weigh on the stocks of the world’s second-largest economy over the near term. Nonetheless, Wall Street is upbeat about several Chinese stocks that are listed in the U.S., given their long-term growth potential.
The E-commerce Giant: Alibaba (BABA)
Shares of Chinese e-commerce giant Alibaba (NYSE:BABA) continue to decline this year after ending 2023 in the red. Macroeconomic challenges in China, intense competition from rivals like PDD Holdings (NASDAQ:PDD) and JD.com (NASDAQ:JD), and uncertainty related to the company’s reorganization plans have dragged down the tech giant’s stock.
Despite near-term headwinds, most analysts remain bullish on Alibaba. This is due to its dominance in the Chinese e-commerce space, solid fundamentals, and prospects in cloud computing and artificial intelligence (AI). The company ended the fiscal second quarter with free cash flow of RMB 45.2 billion, a year-over-year increase of 27%.
Overall, Alibaba scores Wall Street’s “strong buy” consensus rating based on 18 buys and two holds. The average price target of $118.60 for BABA stock implies nearly 73% upside potential.
Into the Electric Future: Nio (NIO)
Shares of Chinese electric vehicle (EV) maker Nio (NYSE:NIO) declined significantly in 2023 and continue to be under pressure this year. Investors remain concerned about the company’s fluctuating performance, macro woes, and continued losses. Also, the price war triggered by Tesla (NASDAQ:TSLA) has also hit Nio and other players.
Looking ahead, Nio is optimistic about its ET9 model, an executive sedan. Deliveries for the vehicle will likely commence in the first quarter of 2025.
Wall Street has a “moderate buy” consensus rating on Nio based on six buys and four holds. At $10.86, the average price target for Nio stock indicates about 82% upside potential.
On the Road to Success: Li Auto (LI)
Macro worries and sluggish growth trends in China’s EV market have impacted investor sentiment for Li Auto (NASDAQ:LI) stock so far in 2024, even though the company’s performance has been impressive in recent quarters.
Overall, Li Auto seems well-positioned for continued growth. Its new EV models like MEGA, the recently announced partnership with chip giant Nvidia (NASDAQ:NVDA), and operating efficiency and cost-management efforts are boosting its profitability.
Overall, Li Auto scores a “strong buy” consensus rating backed by six unanimous buys. The average price target of $53.58 for Li Auto stock implies over 95% upside from current levels.
In conclusion, Wall Street is highly bullish on Li Auto and Alibaba. It is cautiously optimistic about Nio due to profitability concerns. Currently, analysts see higher upside potential in Li Auto than in the other two Chinese stocks. Management’s solid execution and continued demand for Li Auto’s EVs should boost the company’s revenue and profitability in the years ahead.
On the date of publication, Sirisha Bhogaraju did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines. Sirisha Bhogaraju has over 15 years of experience in financial research. She has written in-depth research reports and covered companies across various sectors, with a primary focus on the consumer sector. Sirisha has a master’s degree in finance.
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