Having a stock double in value over the course of a year can feel a bit like winning the lottery. Once the euphoria dies down, though, it can be worthwhile to review the company to understand what drove those gains and determine whether or not the stock is still worthy of your investment dollars.
With that in mind, let's review several recent all-stars that have gained 100% or more in the the previous 12 months. Read on to find out whether Netflix (NFLX 1.74%), iQiyi (IQ), and Baozun (BZUN -2.63%) still represent compelling opportunities for investors or their best days are behind them.
Image source: Getty Images.
Invest in Netflix and chill
Netflix has been one of the hottest stocks around in recent years, up 325% over three years and gaining 160% in the past 12 months alone. So what's driving those explosive gains? In a word, subscribers. Since announcing its worldwide expansion in early 2016, Netflix has added over 50 million global subscribers. Lately, the growth has accelerated to its highest level in two years. In its most recent quarter, the company added 7.41 million subscribers, up 50% year over year, to 125 million. This was driven by the company's popular original programming, with shows like Stranger Things, 13 Reasons Why, Unbreakable Kimmy Schmidt, and GLOW finding audiences worldwide.
Image source: Netflix.
At the same time, revenue grew 40% year over year and earnings per share jumped 60% compared to the prior-year quarter. Average subscription prices grew 14%, as recent price increases took hold. Netflix continues to build out its content library and develop customized programming for local markets.
With accelerating subscriber growth and expanding profit margins, the same strategy that brought Netflix this far looks primed to carry the company far into the future.
Second verse, same as the first
For investors who somehow feel they've missed the boat with Netflix, there is a recently public company with a strikingly similar business model -- with one conspicuous difference: It only serves China. iQiyi was spun off from search giant Baidu (BIDU 0.72%), which still owns a controlling stake. The company is frequently called "The Netflix of China," though the comparison isn't entirely accurate. While iQiyi offers a subscription-based service similar to Netflix, it also has an ad-supported offering that more closely resembles Hulu.
iQiyi Nirvana in Fire II: The Wind Blows in Chang Lin. Image source: iQiyi.
Since its IPO in late March, iQiyi stock has more than doubled, with a number of catalysts driving it higher. iQiyi reported better-than-expected financial results, growing revenue 57% year over year -- after a similar increase in the prior-year quarter. The company is currently not profitable, as it is investing heavily to grab market share in China's nascent streaming market. Its moves in original content have been an unqualified success, as a number of its programs have been selected for inclusion in international film festivals and recognized for excellence. iQiyi also announced a strategic alliance with JD.com (NASDAQ: JD) that allows consumers to sign up for membership in either premium service and receive the benefits of both for one year. That partnership attracted more than 1 million new subscribers in the first week alone.
There's plenty to like about iQiyi, but investors should be prepared for significant volatility along the way.
E-commerce in the Middle Kingdom
You'd be forgiven if you'd never heard of Baozun, which some have taken to calling "The Shopify of China." Baozun offers many of the same cloud-based services as its U.S. counterpart, which includes helping build and maintain an e-commerce site, but the company also provides a host of other services including digital marketing, warehousing, distribution, and customer service. Being an important player in a booming market has driven Baozun's stock price up over 150% in the past year alone.
Two important distinctions are worth noting. Baozun helps companies navigate the regulatory quagmire of China, which has attracted some high-profile partners like Nike, Starbucks, and Microsoft. Additionally, Baozun has working relationships with the biggest e-commerce players in China, including Alibaba's Taobao and Tmall platforms, JD.com, and Tencent's WeChat social messaging app. Being platform-agnostic and a provider of tools allows the company to benefit from the rise of online shopping without having to identify the eventual winner.
Image source: Getty Images.
The company has recently focused on its services segment, moving away from product sales, and that decision is beginning to pay dividends. In its most recent quarter, the company's services revenue grew 50% year over year, helping drive improvements in Baozun's operating margins and profitability.
Even though its stock price has soared over the past year, I think Baozun may still have room to run as the company transitions to a higher-margin business.
