China might not be the first market that investors think about when it comes to big gains in 2020. The world's most populous nation was experiencing a slowing economy even before COVID-19 rocked the globe. However, China was home to some of this year's biggest winners.
Pinduoduo (NASDAQ:PDD), Bilibili (NASDAQ:BILI), and Youdao (NYSE:DAO) are three Chinese stocks that more than doubled through the first six months of this year. Let's see why these hot investments have what it takes to keep the gains coming in the second half of 2020.
China's third-largest e-commerce player is on a growth tear. Revenue soared 44% through the first three months of the year, blowing through Wall Street expectations. A surge in COVID-19 supplies helped pad those gains at the expense of margins as Pinduoduo kept markups in check for medical supplies.
Unlike its two larger rivals, Pinduoduo isn't currently profitable. It also trades at a much higher sales multiple than its peers. However, Pinduoduo's ascending popularity bears watching. It had 487.4 million monthly active users at the end of March, 68% ahead of where it was a year earlier. Annual active buyers have shot 68% higher to 628.1 million. Pinduoduo was already a relevant player in China but has made the most of the new normal to cement its status.
With most of China's youth in lockdown through the first couple of months of the year, it's not a surprise to see Bilibili soaring in status. Its short-form videos, casual games, and social media offerings have been magnetic to its historically young audience. More than 80% of Bilibili users are fans of anime, comics, and gaming, and were born between the years 1990 and 2009.
Bilibili's most recent quarter was also a blowout. Revenue rose 60%, with adjusted earnings more than tripling. Analysts were holding out for considerably less on both fronts.
There are 172 million monthly active users, a 70% burst over the past year. Bilibili's model that has various revenue levers at its disposal -- mobile games, value-added services, advertising, and e-commerce -- has also proven more resilient than online platforms relying largely on China's weak advertising market.
One of the early beneficiaries of the new normal in China was online education, as quarantines found physical schools in the country temporarily closing down. Youdao -- once a seemingly forgotten debutante from the 2019 class of IPO stocks -- has gone on to more than double in 2020 in the current climate.
Youdao serves adults, as well as K-12 students, and its platform for the younger set was already growing quickly ahead of the pandemic shutdown. Revenue growth accelerated to 140% in its latest quarter. Gross billings for its online courses skyrocketed 287%, with Youdao's gross margin expanding dramatically.
There aren't too many niches that have experienced the kind of glow-up that e-learning has experienced this year. This will continue to be a growth niche, even after folks are comfortable again in a traditional-classroom setting.