TSLA - BYD May Be Beating Tesla In China But It's Not Yet A Buy

2024-05-07 14:29:46 ET

Summary

• Chinese stocks have rebounded and attracted capital allocators, with indices rising by around 14% since mid-April.
• BYD, a major player in the global electric vehicle market, experienced sales declines in Q1 2023, but still has a huge untapped market in China.
• BYD has advantages in battery production and a solid balance sheet but faces competition and regulatory risks.
• BYD looks cheap, but if the FDW EPS consensus estimates materialize, the implied P/E ratios will actually rise eating up the stock's growth potential.
• If you don't think the risk factors around BYD have a hook, you can buy BYD stock today or wait for the price to return to the demand zone.

Introduction

I recently published an article on Alibaba Group Holding Limited ( BABA ) stock, in which I also pointed out the high probability that Chinese stocks will have a favorable backdrop, at least in the short to medium term, as they have been underweight for too long and I believed this would attract some capital allocators shortly. And indeed, as Goldman Sachs analysts wrote in their latest note [May 2024, proprietary source], the Chinese market has recovered significantly despite concerns about interest rate hikes in the US, and indices such as the HSCEI and MSCI China have risen by around 14% since mid-April....

For further details see: