Shares of KE Holdings (BEKE 5.45%), the largest real estate platform in China, rose 13.4% today for no obvious reason.
KE Holdings is a stock that has not done well as of late, down more than 68% over the last six months. As a Chinese stock in the real estate industry that is also traded on the New York Stock Exchange, KE Holdings has been very volatile since its initial public offering in August 2020.
Last month, the company reported diluted earnings per American depositary share equivalent to $0.14, down 56% from the same quarter of last year and missing expectations set by analysts. Total revenue equivalent to approximately $3.7 billion increased 20% from the second quarter of 2020 and beat analysts' expectations.
KE Holdings continues to deal with regulatory policies in China that are hurting the company's near-term outlook. Management is now projecting total net revenue to be between $2.2 billion and $2.4 billion in the third quarter, which would be a roughly 24.6% to 29.4% decrease from the same quarter of 2020.
You really have to be cautious when investing in Chinese stocks that trade on American exchanges because of how unpredictable regulation can be.
Not too long ago, analysts assigned KE Holdings a consensus buy recommendation, with an average one-year price target of nearly $67 per share. But since the second quarter, price targets have been reduced drastically. Recently, an analyst at Credit Suisse just decreased its price target on the company from $80 to $18 per share.
So, while I am sure things can change quickly, you really have to do extra due diligence to understand the regulatory implications before investing in a company like KE Holdings.