Chinese and Southeast Asian e-commerce companies have been investor favorites for some time. However, some Chinese online retail giants are currently facing some domestic regulatory scrutiny and hurdles. To add to their woes, the United States recently passed a law that requires the delisting of any foreign security that does not comply with U.S. audit rules for the past three years.
Alibaba Group Holding ((BA)(BA)), the biggest Chinese e-commerce stock, has been under pressure over the past few months. In November, the IPO of the group’s financial arm ANT Holdings was abruptly suspended after its co-founder and CEO Jack Ma spoke against the banking system in China. Chinese regulators also launched an antitrust probe into its e-commerce business and fined (BA)(BA) for an alleged unauthorized corporate takeover. Over the past three months, the stock has declined 15.6%. The company is clearly mired in these controversies and regulatory challenges. Hence, we feel it is wise to avoid this stock for now.
That said, other Asian e-commerce companies have shown immense potential over the years and are likely to continue performing well. Pinduoduo Inc. (PDD), JD.com, Inc. (JD), Sea Ltd. ADR (SE), and Vipshop Holdings Limited (VIPS) are four such e-commerce stocks that we think are strategically positioned to exploit upcoming market opportunities.
Pinduoduo Inc. (PDD)
PDD operates a discounted e-commerce platform in the People’s Republic of China. It offers a wide range of products that include apparel, electronic appliances, shoes, bags, mother and childcare products, and food and beverage.
PDD has launched its Duoduo Maicai service in Shanghai ahead of the Spring Festival. This makes it the first retailer to bring grocery group-buying services to a large city in China. Its neighborhood group-buying model offers shoppers relatively low prices and helps sellers to secure advance and lower inventory and logistics costs.
During the third quarter ended September 30, 2020, PDD surged 89.1% year-over-year to RMB 14.2 billion. Its average monthly active users for the quarter climbed 50% to 643.4 million, while its loss per share contracted to RMB 0.16 compared to RMB 0.50 posted in the same period last year.
The Street estimates revenue for the quarter ended December 31, 2020 to be $2.9 billion, representing an 88.6% increase year-over-year. Meanwhile, its EPS is expected to rise 160% to $0.06.
PDD has rallied 342.3% in the past year to close yesterday’s trading session at $180.43. The stock has climbed 112.8% over the past six months.
How does PDD stack up for the POWR Ratings?
A for Trade Grade
B for Buy & Hold Grade
A for Peer Grade
B for Industry Rank
B for Overall POWR Rating
The stock is also ranked #17 of 103 stocks in the China Industry.
JD.com, Inc. (JD)
JD operates as an e-commerce company and retail infrastructure service provider in China through its segments–JD Retail and New Businesses. Home appliances, mobile handsets and other digital products. desktop, laptop and other computers, and cosmetics are some of the products that JD.com sells. The platform offers its products through its website jd.com and mobile apps, as well as to customers directly.
Due to Beijing’s increased scrutiny of online microcredit, JD has restructured its fintech company, JD Digits, along with JD’s artificial intelligence and cloud businesses, and renamed it JD Technology. Before restructuring, JD Digits had applied for an IPO on China’s domestic stock market.
JD’s revenue for the third quarter ended September 31, 2020 climbed 29.2% year-over-year to RMB 174.2 billion, led by a 42.7% increase in net service revenues. The company’s EPS surged to RMB 4.70 from RMB 0.41 posted in the prior year period. Its Annual active customer accounts advanced 32.1% to 441.6 million in the 12 months ended September 30,2020.
Analysts expect revenue for the quarter ended December 31, 020 to rise 38.4% year-over-year to $33.7 billion. EPS for the quarter is expected to rise 175% to $0.22.
JD ended yesterday’s trading session at $98.38, climbing 131.7% over the past year. During the past six months, the stock surged 53.5%.
JD is rated “Strong Buy” in our POWR Ratings system, with an “A” for Trade Grade, Buy & Hold Grade, and Peer Grade, and a “B” for Industry Rank. It is currently ranked #3 of 103 stocks in the China Industry.
Sea Ltd. ADR (SE)
SE is a digital entertainment, e-commerce, and digital financial service businesses operating in Asia, Latin America, and globally. The company also operates a mobile-centric marketplace, Shopee e-commerce platform, that offers an integrated payment and logistics infrastructure and seller services.
SE has acquired Kesejahteraan Ekonomi, an Indonesian bank, with the goal of transforming it into a digital bank and expanding it across the region. SE is targeting fintech growth in Southeast Asia and has already secured a license to start a digital bank in Singapore.
During the third quarter ended September 30, 2020, SE’s total revenue soared 98.7% year-over-year to $1.2 billion. The company’s revenue from e-commerce and other services surged 113.1% to $489.5 million. Its gross orders for the quarter were 741.6 million, up 130.7% year-over-year. And its loss per share narrowed to $0.38 from $0.69.
The consensus revenue estimate for the quarter ended December 31, 2021 is $1.9 billion, representing a 108.5% year-over-year increase. Its loss per share is expected to shrink 3.8% to $0.51.
SE ended yesterday’s trading session at $228.68, surging 433.1% over the past year. Over the past six months, the stock surged 106.3%.
SE’s POWR Ratings reflect this promising outlook. It has an overall rating of “Strong Buy” with an “A” for Trade Grade, Buy & Hold Grade, Peer Grade and Industry Rank. Among Internet stocks, it is ranked 5th of 69.
Vipshop Holdings Limited (VIPS)
VIPS operates as an online discount retailer through four segments, Vip.com, Shan Shan Outlets, Internet Finance, and Others for various brands in the People’s Republic of China. The company sells women’s and men’s apparel, as well as accessories. VIPS also offers Internet finance services, which comprise consumer and supplier financing, and microcredit.
VIPS’s revenue for the third quarter ended September 30, 2020 jumped 18.2% year-over-year to RMB 23.2 billion. The number of its active customers climbed 36% year-over-year to 43.4 million, while the total orders rose to 172.8 million.
Analysts expect revenue for the quarter ended December 302020 to rise 28.2% year-over-year to $5.4 billion. Meanwhile, its EPS for the quarter is likely to expand 22.5% to $0.49.
VIPS ended yesterday’s trading session at $29.08, soaring 109.8% over the past year. During the past six months, the stock surged 35.2%.
VIPS is rated “Strong Buy” with an “A” for Trade Grade, Buy & Hold Grade and Peer Grade and a “B” for Industry Rank. It is currently ranked #7 of 103 stocks in the China Industry.
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PDD shares were trading at $175.37 per share on Tuesday afternoon, down $5.06 (-2.80%). Year-to-date, PDD has declined -1.29%, versus a 2.69% rise in the benchmark S&P 500 index during the same period.
About the Author: Namrata Sen Chanda
Namrata is an accomplished financial journalist, with nearly a decade of experience. She specializes in interpreting news releases and framing investment strategies, and has worked with some of the leading companies in real estate, banking, insurance, mutual funds, financial research, fintech, and investment education. More…