Chinese stocks are back in focus, with President Donald Trump threatening a 10% tariff on Chinese imports effective February 1. Trump accused China of sending fentanyl to the U.S. via Mexico and Canada. If fresh tariffs are imposed, then this might escalate the trade war between the U.S. and China, adversely impacting U.S.-listed shares of Chinese companies. Despite this backdrop, Wall Street is bullish on some Chinese stocks due to their long-term growth potential. We used TipRanks’ Stock Comparison Tool to place Alibaba (BABA), NetEase (NTES), and Nio (NIO) against each other to pick the Chinese stock with the highest upside potential, according to analysts.
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Alibaba (NYSE:BABA)
The U.S.-listed shares of Alibaba have risen more than 23% over the past year, as investors cheered the improvement in the company’s performance despite macro challenges in China. The company has been under pressure in recent years due to regulatory headwinds and increasing competition from players like ByteDance and PDD Holdings’ (PDD) Pinduoduo.
However, massive restructuring efforts, including the company’s decision to split into six divisions, helped streamline the business. Further, in November 2024, Alibaba announced its decision to integrate its Chinese and international e-commerce platforms into a single unit called Alibaba E-commerce Business Group.
Aside from the efforts to enhance operational efficiencies, Alibaba is also gaining from artificial intelligence (AI)-led tailwinds across its e-commerce and cloud computing businesses. While there is a need for continued improvement, the company seems to be on the right track to revive growth in its core businesses.
Is BABA Stock a Good Buy Right Now?
On Tuesday, Bank of America Securities analyst Joyce Ju increased the price target for Alibaba stock to $117 from $112 and maintained a Buy rating. The analyst expects the company to report overall revenue growth of over 9% to RMB 283.5 billion in Q3 FY25 (December quarter), 2% above the Street’s consensus estimate.
Moreover, Ju expects core Taobao and Tmall Group’s revenue to increase by 7% year-over-year and adjusted EBITA to rise by 1%, with solid seasonality and enhanced monetization more than offsetting increased investments. He added that the segment’s December quarter performance would have gained from robust Gross Merchandise Volume (GMV) due to Singles Day promotions, a subsidy initiative for home appliances, and ongoing improvements to user engagement and experience.
Moreover, Ju forecasts Alibaba International Digital Commerce (AIDC) and Alibaba Cloud to deliver revenue growth of 26% and 9% in the December quarter, respectively.
With 10 Buys and one Hold, Alibaba stock earns a Strong Buy consensus rating on TipRanks. At $121.27, the average BABA stock price target indicates 42% upside potential.
NetEase (NASDAQ:NTES)
The American Depositary Shares (ADS) of Chinese gaming and streaming music company NetEase have risen 10% over the past year. The company reported a 3.9% decline in its Q3 2024 revenue amid macro challenges and intense competition in the gaming space. A 4.2% decline in the revenue of the NetEase’s Games segment (the largest segment) more than offset the growth in the online education platform Youdao and the Cloud Music segment.
Nonetheless, NetEase is optimistic about the road ahead, driven by the launch of new titles and the expansion of established games into new regions. In particular, the company is confident about continued demand for its popular games like Identity V and Naraka: Bladepoint and new launches like Marvel Rivals and Where Winds Meet.
Is NTES Stock a Buy?
Recently, Jefferies analyst Thomas Chong increased the price target for NetEase stock to $120 from $102 and reiterated a Buy rating. The analyst believes that the success of Marvel Rivals and Where Winds Meet will support the growth momentum this year. Chong expects Marvel Rivals’ annual revenue to come in at about RMB 3.6 billion across Steam and other platforms.
Meanwhile, for Where Winds Meet, the analyst expects the PC and mobile versions to generate about RMB 4 billion in 2025. Overall, Chong estimates NetEase’s overall gaming revenue to grow by 8% year-over-year this year, with PC games to rise about 25%.
Wall Street has a Strong Buy consensus rating on NetEase stock based on eight Buys and one Hold recommendation. The average NTES stock price target of $111.72 implies about 11% upside potential.
Nio (NYSE:NIO)
Shares of electric vehicle maker Nio have plunged 31% over the past year, reflecting the impact of intense price wars due to growing competition, macro pressures, and concerns over the company’s profitability.
On the positive side, Nio recently reported solid delivery numbers for December. The company’s December deliveries grew 73% year-over-year to 31,138 vehicles, bringing the Q4 growth to 45%. Notably, December deliveries gained from an increase in the supply of the company’s Onvo sub-brand, which targets the mass market.
Overall, Nio delivered 221,970 vehicles in 2024, up 38.7% compared to the previous year. The company aims to double its deliveries in 2025, mainly driven by its Onvo and FireFly sub-brands. The company aims to launch its first Firefly model this year for the mass-market customers.
Is NIO Stock a Buy, Sell, or Hold?
Recently, Bernstein analyst Eunice Lee reiterated a Hold rating on Nio stock with a price target of $4.50. The analyst is skeptical about the company’s ability to meet its targets. Nio aims to double its sales in 2025 and deliver group-level breakeven next year. However, Lee contends that the company’s goals are difficult to reach, given the slower-than-anticipated ramp-up of Onvo L60.
Lee expects Nio to deliver 327,000 units in 2025, reflecting a 47% year-over-year growth. He noted that Nio guided higher selling and distribution expenses in Q4 2024 and Q1 2025 due to the increase in the salesforce associated with Onvo’s expansion. Overall, the analyst is concerned about Nio’s ability to turn profitable, given the persistent rise in its expenses.
Wall Street has a Hold consensus rating on Nio stock based on four Buys, six Holds, and two Sell ratings. The average Nio stock price target of $5.55 implies nearly 33% upside potential.
Conclusion
The 10% potential tariff by Trump could worsen the ties between the U.S. and China and impact Chinese stocks. Amid the ongoing uncertainties, Wall Street is currently optimistic about Alibaba and NetEase but sidelined on Nio stock. Analysts see higher upside potential in Alibaba stock than the other two Chinese stocks. They expect Alibaba’s restructuring efforts to drive further improvements. Analysts also expect the company to gain from AI tailwinds and growth in the Cloud business.
