The Chinese economy and many Chinese companies have struggled on a general scale over the last few years. The slowdown was primarily due to tightening government regulations and property pricing halting the expected recovery after COVID-19 restrictions were lifted in 2023.
While these macroeconomic conditions create uncertainty and scare away many investors, they offer a unique opportunity to find Chinese stocks that are performing exceedingly well but still receive low valuations. These three stocks offer investors the perfect chance to capitalize on these low prices and enjoy the fruits of these successful companies’ labor.
Let’s learn more about the exciting products and services, smart investments and diverse revenue streams that give these undervalued stocks the best chance to weather the macroeconomic storm.
Tencent Holdings (TCEHY)
Tencent Holdings (OTCMKTS:TCEHY) is a Chinese tech company with diverse offerings and services. It operates in several different markets, including mobile gaming, music streaming, messaging and cloud-platform services.
Tencent generates a considerable portion of its revenue through its widely popular mobile games, such as PUBG Mobile and Honor of Kings. The number of Tencent mobile and PC games that surpassed the Chinese average daily user count of 5 million for mobile and 2 million for PC increased to 8 games in 2023 from 6 in 2022.
Tencent’s gaming segment is estimated to account for a little less than half of the company’s revenue, which reached $86.0 billion in 2023. However, the company also has a wildly successful messaging platform, WeChat, with over 1.3 billion monthly active users.
Tencent plans to monetize further and improve profits from WeChat by focusing on advertising for many other services. Tencent has gaming and advertising to continue to drive profits but also has a foothold in cloud services and business software, giving it much-needed diversity to survive and grow long-term.
Overall, the company’s excellent prospects and $41.4 billion gross profit for 2023 make its 16.71 P/E ratio too good to be true. Investors should look no further for an undervalued Chinese stock to buy this month.
Baidu (BIDU)
Baidu (NASDAQ:BIDU) is another promising Chinese tech company with an established reputation. It is one of China’s most popular search engines and has an exciting cloud platform, giving it great potential to perform. Baidu has also expanded its investment base, starting a $145 million venture capital fund for generative AI start-ups last year.
While some investors are hesitant due to Baidu’s close relationship with the Chinese government, there is less reason to fear the risk of delisting when the stock is valued relatively low. Baidu trades at a P/E ratio of 18.3, and while it had a modest 9% year-over-year revenue growth in 2023, the company has a fantastic potential upside.
Recently, Baidu’s AI chatbot tool “Ernie” was reported to have reached over 200 million users and is frequently compared to ChatGPT. The potential that such a popular and advanced tech tool brings to Baidu’s future is undeniable.
While Baidu’s appeal to American investors carries some risk, if you can stomach it, it is one of the best buys in Chinese stocks. Its potential to continue to grow as a search engine giant, along with several other revenue streams trading at a low valuation, is undeniable.
Alibaba Group Holdings (BABA)
Alibaba Group Holdings (NYSE:BABA) is another tech company with a wide range of services and platforms and phenomenal growth potential. Alibaba is not only one of the largest e-commerce platforms in the world but also provides media, entertainment, and cloud platform services.
In Alibaba’s most recent earnings, the company reported $62,904 million in revenue for fiscal 2024, an 11% year-over-year increase. Free cash flow reached $11,556 million, representing an increase of 46% year-over-year.
The stock is performing exceedingly well, considering its P/E ratio of 17.3. It is, without a doubt, undervalued from a purely financial perspective. Alibaba also has a history of making intelligent investments to secure its future, investing $1 billion in its partners to support the ecosystem of its up-and-coming cloud platform.
Future growth is almost inevitable, and the Chinese government and economy are factors to consider, but this should not make you count this excellent tech stock out for good.
On the date of publication, Joel Lim 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.