Investors remain concerned about Chinese stocks because U.S. regulators are threatening to delist a few Chinese companies from U.S. exchanges because they have failed to meet U.S. audit requirements. However, China’s tech sector is poised to rebound owing to the state council's vow to support the nation's unstable economy by mitigating the regulatory crackdown on technology companies, providing new support for property developers, and boosting the broader economy.
Last Tuesday, Chinese tech companies in Hong Kong saw significant gains. The Hang Seng index finished 9.08% higher at 20,087.50, its highest one-day gain since Oct. 30, 2008, when it gained 12.82%. Furthermore, Chinese tech giants’ investments in the metaverse could bolster the sector's prospects. According to Morgan Stanley, the market for the metaverse could be approximately $8 trillion.
Therefore, Wall Street Analysts predict Chinese tech stocks DiDi Global Inc. (DIDI), GDS Holdings Limited (GDS), Full Truck Alliance Co. Ltd. (YMM), Tuya Inc. (TUYA), and Kingsoft Cloud Holdings Limited (KC) to rally significantly in the coming months.
DiDi Global Inc. (DIDI)
Headquartered in Beijing, China, DIDI is a mobility technology platform that provides ride-hailing, taxi-hailing, chauffeur, hitch, and other forms of shared mobility services, as well as enterprise business ride solutions; auto solutions comprising leasing, refueling, and maintenance and repair services; and other services internationally.
DIDI's total revenue amounted to RMB 42.68 billion ($6.71 billion) for the third quarter ended Sep. 30, 2021. Its cash and cash equivalents stood at RMB 48.65 billion ($7.65 billion) for the nine months ended Sept. 30, 2021.
Analysts expect DIDI's revenue to increase 10.7% year-over-year to $8.38 billion for the second quarter, ending June 30, 2022. The stock has gained 3.2% in price over the past month.
The only Wall Street analyst that rated the stock rated it Buy. Closing its last trading session at $4.16, the 12-month median price target of $6.20 indicates a 49% potential upside.
GDS Holdings Limited (GDS)
Along with its subsidiaries, GDS develops and operates data centers in the People's Republic of China and provides colocation, managed hosting, managed cloud services, and consulting services to the cloud, internet, and banking industries. The company is headquartered in Shanghai, the People's Republic of China.
In the fourth quarter, ended Dec. 31, 2021, GDS' total net revenue increased 34.1% year-over-year to RMB 2.19 billion ($343.85 million). Its gross profit grew 13.3% from its year-ago value to RMB 487.27 million ($76.60 million), while its income from operations amounted to RMB 152.01 million ($23.90 million) over the period. Its cash and cash equivalents stood at RMB 9.97 billion ($1.57 billion) for the fiscal year ending Dec. 31, 2021.
GDS revenue is expected at $345.55 million, representing 30.4% year-over-year growth in the first quarter, ending March 31, 2022. In addition, the company has an impressive earnings surprise history; it surpassed the consensus EPS estimates in each of the trailing four quarters.
All four Wall Street analysts that rated the stock rated it Buy. The 12-month median price target of $69.50 indicates an 87.7% potential upside. The price targets range from a low of $60.00 to a high of $85.00. The stock closed its last trading session at $37.02.
Full Truck Alliance Co. Ltd. (YMM)
Headquartered in Guiyang, China, YMM operates a digital freight platform that connects shippers with truckers and its subsidiaries to enable shipments across long distances, cargo weights, and types in the People's Republic of China. It also offers freight listing, matching, brokerage services, and online transaction services.
In the fourth quarter, ended Dec.31, 2021, YMM's net revenue increased 68.1% year-over-year to RMB 1.43 billion ($224.70 million). Its non-GAAP operating income increased 31.4% year-over-year to RMB 159.06 million ($25.00 million), while its non-GAAP net income improved 64.2% year-over-year to RMB 242.75 million ($38.16 million) over the period. The company's non-GAAP EPS increased 666.7% from its year-ago value to $0.23.
The $0.49 consensus EPS estimate for its fiscal 2023 represents a 407% improvement year-over-year. Analysts expect YMM's revenue to increase 31% year-over-year to $175.55 million in the first quarter, ending March 31, 2022.
Both Wall Street Analysts that rated the stock rated it Buy. Closing its last trading session at $6.30, the 12-month median price target of $15.35 indicates a 143.7% potential upside. The price targets range from a low of $15.00 to a high of $15.70.
Tuya Inc. (TUYA)
TUYA operates an Internet of Things (IoT) cloud platform worldwide. The Hangzhou, China-based concern provides an IoT cloud platform that delivers a suite of offerings, including Platform-as-a-Service (PaaS) and Software-as-a-Service (SaaS) to original equipment manufacturers, industry operators, and system integrators.
In January, TUYA, together with Monster, Razer, and JEM Accessories, announced an expansion of TUYA and JEM's strategic partnership by integrating Monster Smart Illuminessence lighting products into the Razer Chroma RGB ecosystem. This new integration should facilitate immersive decorative lighting experiences indoors and out, and consumers will soon elevate their game with next-level, real-time LED multi-sensory lighting experiences.
TUYA's net sales increased 19% year-over-year to $74.97 million in the fourth quarter ended Dec. 31, 2021. Its gross profit grew 34.1% from its year-ago value to $32.35 million. Its cash and cash equivalent stood at $963.94 million for its fiscal year ending Dec. 31, 2021.
Analysts expect TUYA's revenue to increase 23.3% year-over-year to $372.59 million for fiscal 2022.
The sole Wall Street Analyst that rated the stock rated it hold. The 12-month median price target of $7.20 indicates a 99.5% potential upside. The stock closed its last trading session at $3.61.
Kingsoft Cloud Holdings Limited (KC)
Headquartered in Beijing, the People's Republic of China, KC offers cloud services to businesses and organizations in China. It also offers public cloud services to customers in various verticals, including game, video, AI, e-commerce, education, mobile internet, enterprise cloud services to customers in financial service, public service, healthcare business, and others.
In the third quarter, ended Dec. 31, 2021, KC's total revenue increased 39.6% year-over-year to RMB 2.41 billion ($379.45 million). Its gross profit amounted to RMB 88.41 million ($13.90 million) for the quarter. The company's cash and cash equivalents stood at RMB 3.44 billion ($541.42 million) for nine months ended Sept. 30, 2021.
The $411.16 million consensus revenue estimate represents 39.1% year-over-year growth in the fourth quarter, ending Dec. 31, 2021.
Of the two Wall Street Analysts that rated the stock, one rated it hold. Closing its last trading session at $5.64, the 12-month median price target of $10.75 indicates a 90.6% potential upside. The price targets range from a low of $3.50 to a high of $18.00.
Click here to check out our Cloud Computing Industry Report for 2022
DIDI shares were trading at $4.29 per share on Tuesday morning, up $0.13 (+3.13%). Year-to-date, DIDI has declined -13.86%, versus a -5.61% rise in the benchmark S&P 500 index during the same period.
About the Author: Spandan Khandelwal
Spandan's is a financial journalist and investment analyst focused on the stock market. With her ability to interpret financial data, she aims to help investors evaluate the fundamentals of a company before investing.
5 Chinese Tech Stocks Wall Street Predicts Will Rally by More than 45% StockNews.com
