Show me the money.
That line from the movie Jerry Maguire could be a motto for many investors. Some would probably like to tweak the phrase a little to add "quickly" at the end.
Making a lot of money in a short period isn't easy -- and there are no guarantees that it will happen. But some analysts seem to think they've identified picks that make it possible. Want 54% to 81% returns over the next 12 months? Wall Street says to buy these three stocks.
1. Baidu
Baidu (BIDU +0.17%) hasn't taken part in the stock market's resurgence since early 2023. Shares of the Chinese technology company are down close to 20% over the last 12 months. The tech stock has been held back in large part because of China's economic slowdown.
NASDAQ: BIDU
Key Data Points
However, the average 12-month price target for Baidu reflects an upside potential of 54%. Granted, not every analyst on Wall Street is bullish about the stock. Of the 33 analysts surveyed by LSEG in January, though, 19 rated Baidu as a buy or a strong buy.
Despite facing macroeconomic headwinds, Baidu's underlying business remains solid. The company reported 23% year-over-year adjusted earnings growth in the third quarter of 2023. It's sometimes referred to as the "Google of China" and continues to dominate the search engine market in its home country.
Baidu could have strong growth prospects as Asian companies move their apps and data to the cloud. It's also investing heavily in artificial intelligence (AI). For example, Baidu's ERNIE generative AI app allows customers to build their own AI solutions.
2. Alibaba Group
While Baidu is sometimes called the "Google of China," Alibaba Group (BABA 0.27%) has earned the nickname of the "Amazon of China" because of its huge e-commerce platform. Like Baidu, Alibaba's share price has suffered partially as a result of the slowing Chinese economy. The stock has fallen nearly 40% over the last 12 months.
NYSE: BABA
Key Data Points
Wall Street appears to be confident that Alibaba will bounce back. The consensus 12-month price target for the stock is 56% higher than the current share price. Even the most pessimistic analyst thinks that Alibaba's shares could jump 15%. Of the 48 analysts surveyed by LSEG in January, all but one rate Alibaba as a buy or strong buy. The lone outlier recommends holding the stock.
As was the case with Baidu, Alibaba's business continues to perform relatively well. In its latest reported quarter, the company's revenue and adjusted earnings jumped 9% and 19% year over year, respectively. Alibaba's international digital commerce group especially stood out with revenue soaring 53%.
The company abandoned its plans to spin off its cloud unit because of U.S. restrictions on exporting powerful AI chips to China. However, Alibaba should still have plenty of growth opportunities with its cloud business and its AI initiatives.
3. JD.com
Make it three in a row. Another Chinese tech stock is also a Wall Street favorite -- JD.com (JD +2.22%). Shares of the e-commerce company have plunged more than 60% over the last 12 months. Again, the weakening Chinese economy was a big culprit behind this sell-off.
NASDAQ: JD
Key Data Points
Many analysts believe that JD.com's near-term future looks better than its recent past. Thirty-two of the 37 analysts surveyed by LSEG in January rate the stock as a buy or strong buy. The average 12-month price target for JD.com reflects an upside potential of 81%.
JD.com's business isn't booming as much as Baidu's and Alibaba's, though. The company's net revenue rose only 1.7% year over year in 2023 Q3. Adjusted earnings increased by nearly 6.9%. Those numbers aren't horrible, but they're not impressive, either.
Is Wall Street right about these stocks?
Investors shouldn't bet the farm that they'll be able to obtain 54% to 81% returns with these stocks. Wall Street's price targets could prove to be way off the mark. In particular, I'm concerned that the Chinese economy could continue to disappoint.
That said, Baidu, Alibaba, and JD.com are all attractively valued with forward earnings multiples of 9.8 or lower. Each company should have good long-term prospects.
My view is that risk-averse investors will be better off avoiding these Chinese tech stocks. However, I think they're worthy of consideration for aggressive (but patient) investors.
