China has been recovering rapidly from the claws of the deadly virus. And, the economic data is reflecting this progress. The country’s Gross Domestic Product (GDP) is projected to grow at 1.9% this year according to the International Monetary Fund’s (IMF) World Economic Outlook released last month. China is also the only economy in the world whose economy will expand this year…
The United States has already witnessed more than 1 million new COVID-19 cases in the first 10 days of November. With the rising number of coronavirus cases in the United States and consequent market volatility, china stocks are attracting investor’s attention. Moreover, the solid performance of China stocks is reflected in the year-to-date gains of Invesco Golden Dragon China ETF (PGJ) which focuses on companies deriving a substantial portion of their revenues from China but listed on the U.S. stock exchange. The ETF returned 37.9% year-to-date as compared to the S&P 500’s gains of 10.6% over this period.
Even though the Chinese market witnessed a tech sell-off recently owing to greater regulatory controls, it doesn’t seem to be a long-term concern. With these positives, Yum China Holdings, Inc. (YUMC), iQIYI, Inc. (IQ), and Vipshop Holdings Limited (VIPS) are expected to soar in the coming years.
Yum China Holdings, Inc. (YUMC)
Headquartered in Shanghai, China, YUMC is China’s largest restaurant company. The company operates China’s leading restaurant concepts, including KFC and Pizza Hut brands, as well as brands such as East Dawning, Little Sheep, Huang Ji Huang, Taco Bell, and COFFii & JOY. Each of its brands has proprietary menu items and unique recipes to better capture market demand. The company also provides online food delivery services.
YUMC’s total revenues increased 1.3% year-over-year to $2.35 billion for the third quarter ended September 2020. Operating profit increased 86% year-over-year to $556 million. YUMC opened 312 gross new stores in the quarter. Digital orders increased by 97% in the third quarter. EPS increased 100% sequentially to $0.68 surpassing the consensus estimate by 36%.
Analysts expect YUMC’s revenue to increase 7% for the quarter ending December 2020 and 19.8% next year. The company’s EPS is expected to increase by 4% for the quarter ending December 2020, 28% next year and at a rate of 9.8% per annum in the next five years. YUMC has an impressive earnings surprise history with the company beating consensus EPS estimates in each of the trailing four quarters.
On November 6th YUMC signed a framework agreement with the Hubei provincial government to promote the sustainable development of the local economy. In August the company opened a new Taco Bell store in Beijing, its first store in the city. YUMC reached the milestone of 10,000 stores in its restaurant network across China and overseas this year in July. The stock has gained 19.5% year-to-date. It is currently trading 0.9% below its 52-week high of $59.35 which it hit on August 31st.
How does YUMC stack up for the POWR Ratings?
A for Trade Grade
A for Buy & Hold Grade
A for Peer Grade
B for Industry Rank
A for Overall POWR Rating
The stock is also ranked #5 out of 115 stocks in the China industry.
iQIYI, Inc. (IQ)
A subsidiary of Baidu Holdings Limited (BIDU), IQ was founded in 2009. A leading online entertainment service provider in China, the company operates a platform that provides a collection of Internet video content, including professionally-produced content licensed from professional content providers and self-produced content. It also operates through iQIYI Mall, iQIYI Show, and iQIYI Paopao.
IQ’s total revenues increased 4% year-over-year to…
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