Be greedy when others are fearful. Or put in other words, the best time to buy is when no one else wants it.
These statements are true for Chinese stocks right now, which are far cheaper today than they were a year ago.
But two stocks among the bunch have caught my eye, and both look to be well positioned to climb much higher in 2019.
Here’s what you need to know about these two Chinese stocks.
Alibaba (NYSE: BABA)
After hitting an all-time high of $211.70 back in June, Alibaba (NYSE: BABA) shares have lost nearly a third of their value as trade tensions between the U.S. and China intensify.
But this sell-off looks to be overdone, and we could see this Chinese internet behemoth reaching new all-time highs in no time.
There’s a lot to like about BABA. First, Alibaba’s massive presence in China means it’s likely the company will continue to be a big winner there as the country’s e-commerce market—a market that is expected to grow to $1.8 trillion by 2022—continues to develop. In fact, it may benefit more than any other business considering the company dominates a greater than 50% market share already.
Second, the company is working to generate more than 50% of its annual revenue outside of China, an ambitious goal, but one that if achieved within the next five years, could push the stock far, far higher.
Third, Alibaba’s P/E of 46 just isn’t that high when you consider that revenue grew 54% year-over-year in Q2, including 90% growth in its cloud computing business – an area where the company is taking market share from larger players in the space.
Analysts’ average twelve-month price target for BABA is $215.33, indicating potential upside of 38.58%. Earlier this week, MKM rated the stock a Buy and set its price target at $245 – more than 57% higher than the current price.
Momo (NASDAQ: MOMO)
Momo (NASDAQ: MOMO) is often called the “Tinder of China,” but the company is so much more than just a dating app.
The company’s namesake social networking app enables users to find each other via shared profiles and locations, and is often used as a dating app. However, because of its model, Momo has amassed a massive treasure trove of user and location-based digital data which it can leverage in advertising.
Momo has also bet big on the streaming video business in its core app, which has become one of its primary growth drivers. Its streaming app enables individual users to reach broad audiences and is monetized through virtual gifts that viewers purchase for their favorite broadcasters. The company also generates revenue from a premium paid-subscription tier, which delivers better AI-powered matches, better search exposure, and gives users the ability to see which users “like” them.
And the move is paying off. Momo’s total revenue rose to $494.3 million in the second quarter, up 58%, and revenues for live video streaming accounted for 83% of the company’s top line. Margins are huge for the user-created content and virtual gifts as evidenced by the 90% growth in non-GAAP net income to $140.2 million during the quarter, and its GAAP net income growth of 94% to $117.8 million.
The company also saw its monthly active users (MAUs) for its core app grow 18% annually to 108 million users, and its paid-users jumped 63% to 11.6 million in its last quarter.
Wall Street is anticipating that this impressive momentum will continue, and the average twelve-month price target for MOMO is $50.60, suggesting possible upside of 52.78%.