With the markets continuing to print new highs, and interest rates continuing to hover near lows, the market is getting a much more difficult place to find stocks to buy that are not fully valued. Despite the lofty perch of the market, there is a very good chance that the economy is starting to pick up, and if that’s indeed the case, we could be poised to go even higher.
In a new research report, Jefferies analysts looked for companies that have good upside potential and also are presenting investors with very good levels at which to buy shares. Jefferies also looks to China for ideas, and two of the following stocks are market leaders there. All four are rated Buy at Jefferies.
This time two years ago, this company was the hottest thing on the planet and getting ready to come public. Alibaba Group Holding Ltd. (NYSE: BABA) is the largest online and mobile commerce company as measured by gross merchandise volume, and it had the highest profile initial public offering (IPO) of 2014. The stock has acted horrible since, printing highs at $120 in mid-November of 2014.
Plain and simple, the dominance in Alibaba’s core business, the very hard barrier to entry for competition and new growth opportunities like cross-border e-commerce make the stock extremely attractive. With most of the damage to the China equity markets seemingly subsided for now, the residual effect to the company may all subside some.
The Jefferies team sees the company as cheap, with outstanding premium growth potential. They also note that the company has gone beyond e-commerce and developed into a sophisticated new type of conglomerate in the cyber-era with e-commerce as the base for the rest of the four businesses: logistics, finance, data-computing and cross-border infrastructure. They expect a whopping 24% compounded annual growth rate between now and 2018 for e-commerce in China.
The Jefferies price target for the stock is $101. The Wall Street consensus target price is lower at $96.20. The stock closed Friday at $84.49 per share.
This is another top Chinese company that the Jefferies team remains very positive on. Baidu Inc. (NASDAQ: BIDU) provides internet search services in China and internationally. It operates through Search Services, Transaction Services and IQiyi segments. It offers Chinese language search platform on its Baidu.com website that enables users to find relevant information online, including web pages, news, images, documents and multimedia files through links provided on its website. It also offers transaction platforms, including Nuomi.com to connect online and offline services provided by third parties.
The company provides transaction services as well, such as Baidu Nuomi, Baidu Takeout Delivery, Baidu Maps, Baidu Connect, Baidu Wallet and others. iQiyi is an online video platform with a content library that includes licensed movies, television series, cartoons, shows and other programs. Other companies on Wall Street are bullish on Baidu as well.
Jefferies has a $188 price objective for the stock, but the consensus target is higher at $194.40. Shares closed most recently at $160.88.