The recent trend among investment analysts is to upgrade U.S.-listed Chinese stocks to buy, signaling a positive outlook for these companies. This comes as many Chinese firms are releasing their earnings for the last quarter of 2023 and the full year. While there is skepticism about China's ability to meet its growth target for 2024 without additional stimulus, the country has reported better-than-expected economic data in areas such as retail sales, industrial production, and fixed asset investment for the first two months of the year.
Several Chinese stocks have caught the attention of analysts and have been upgraded to buy ratings. These include:
Citi upgraded Tencent Music Entertainment (TME) to buy with a price target of $13 a share. This reflects an 18% increase from the previous close. TME, a major player in the Chinese music streaming industry, surpassed expectations in its fourth quarter results. The company's online music revenues performed well, contributing to its growth. Analysts believe TME's subscription music business, coupled with its expanding capabilities in the music value chain, will drive sustained growth.
JPMorgan upgraded Kingsoft Cloud to overweight, despite lowering its price target slightly to $4.20 a share. This still represents a significant increase from the previous closing price. The company is projected to achieve break-even status in the first quarter of 2024 on an EBITDA basis, a milestone it has not reached before. The optimistic outlook is based on revenue transitioning to higher-margin sources, particularly in artificial intelligence, as well as a reduction in costs due to asset write-offs.
BofA upgraded Vnet Group to buy with a price target of $2.70 a share, reflecting a more than 35% increase from the previous close. The analysts anticipate that a local government contract and demand from short video companies will bolster Vnet's revenue in the coming years. With an established presence in over 20 Chinese cities, Vnet is well-positioned to capitalize on the growing demand for data center services.
In addition to the aforementioned companies, analysts are increasingly optimistic about other Chinese stocks as well. For instance, JPMorgan recently upgraded Bilibili to neutral from underweight, with a price target of $11. The company is expected to achieve double-digit revenue growth this year, aided by new game releases and positive operating cash flow in past quarters.
Overall, the upgraded ratings and positive outlook for these U.S.-listed Chinese stocks reflect the growing confidence in the Chinese market and the potential for these companies to deliver strong financial performance in the future. Investors may want to keep a close eye on these stocks as they continue to attract attention from analysts and market participants.