Earnings season is nearing the end, but we have a few notable Chinese growth stocks stepping up for their quarterly updates. Baidu (NASDAQ:BIDU), Bilibili (NASDAQ:BILI), and NetEase (NASDAQ:NTES) are some of the more interesting companies slated to step up this week.
Baidu kicks things off shortly after Monday's market close. Its earnings call will follow in the evening. Bilibili follows on Wednesday afternoon, and NetfEast brings us home the following morning with its third-quarter numbers. There's a lot riding on these events. Let's take a closer look at each upcoming report.
China's leading search engine has slipped from the ranks of China's elite growth stocks since hitting all-time highs in the springtime of 2018. Revenue has declined in four of the past five quarters, and the 5% top-line increase it posted for all of 2019 -- 8% adjusted for divested businesses -- is its worst showing as a public company.
Investors are starting to warm up to Baidu after a two-year break. The stock hit a new 52-week high last week, and even though it would still have to nearly double to take out its all-time highs it's obviously trending in the right direction.
Its summer guidance for the financials it will report later today may seem grim at first. Baidu's top-line is expected to clock in between 6% lower to 2% higher than year-ago results. However, we are looking at an increase at the high end of that range, and that's something that we haven't seen this year. Analysts see improving earnings, and Baidu has topped Wall Street's profit targets with ease in each of the past four quarters. The stock is rallying into this report, and that means that it will have to do more than simply stretch its streak of bottom-line beats. Baidu will need to offer encouraging growth for the current quarter.
There aren't too many stocks hotter than Bilibili this year. Shares are up 163% in 2020, and the online hub for China's youth has proved ridiculously sticky with its casual games, short-form videos, and social media features.
Bilibili is cashing in on its young fans of anime, comics, and gaming. Revenue soared 70% in its previous quarter, and its earlier guidance calls for revenue to decelerate only slightly. The stock still took a hit after posting second quarter results, and it wasn't because of the 64% to 67% top-line growth that Bilibili was projecting for the quarter it will discuss on Wednesday.
The problem at Bilibili is that the 171.6 million average monthly active users on its platform at the end of June -- while a 55% year-over-year increase -- is actually a small sequential dip from the 172.4 million on its rolls at the end of March. This isn't as bad as it seems. There is seasonality at play here, and we saw the same thing happen last year. However, investors will expect a healthy sequential and year-over-year increase in users for its latest quarter. If Bilibili is going to close out 2020 as one of this year's hottest stocks it's going to have to come through on Wednesday.
One of China's best stocks over the past two decades is still not a household name. It's a 100-bagger since going public in the summer of 2000 -- a 113-bagger, to be exact -- adjusted for a pair of stock splits along the way. NetEase is one of China's leading players in online gaming, and it's happy to share the wealth. It shells out roughly 20% to 30% of its anticipated after-tax earnings as quarterly dividends, and its payouts have been growing along with its bottom line.
It's not just about dividends here, of course. The stock has moved higher in seven of the past eight years. It's rolling these days. After three years of top-line growth in the mid-teens its revenue is more than doubling that pace in 2020. Analysts see a 31% increase in revenue for this week's report.
No one will deny that investing in Chinese stocks is risky. Baidu, Bilibili, and NetEase have a lot going for them, but they will need to make sure they hit it out of the park this week. They have a lot to prove. Investors have a lot to gain.