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With many Chinese stocks continuing to rise, investors are becoming more intrigued at the possibility of adding exposure to China again. Still, the volatility among Chinese equities over the last few years has soured a lot of investors from wanting to invest directly in Chinese companies.
However, here are two stocks that may be “safer” investments after mainland China has mostly ended its Zero-Covid policy and reopened the economy.
The first stock on the list is a very familiar name. Starbucks has over 6,000 stores in China, but its headquarters and upper management is in Seattle, Washington.
Starbucks will get a significant boost from mainland China reopening. In fact, at the end of the company’s most recent fiscal fourth quarter, the U.S. and China comprised 61% of Starbucks’ global portfolio with 15,878 stores in the U.S. and 6,021 stores in China.
Image Source: Zacks Investment Research
As mainland China continues its Zero-Covid recovery and reopening it is quite plausible that earnings estimates will continue to rise for Starbucks stock. For now, Starbucks lands a Zack Rank #3 (Hold).
Starbucks earnings are currently expected to climb 15% in fiscal 2023 and jump another 17% in FY24 to $4.01 per share. Even better, earnings estimate revisions have steadily trended higher over the last 90 days for both FY23 and FY24.
Image Source: Zacks Investment Research
Sales are projected to be up 11% in FY23 and rise another 11% in FY24 at $39.85 billion. More importantly, fiscal 2024 would represent 50% growth from pre-pandemic levels with 2019 sales at $26.50 billion.
Another more “trustworthy” investment for exposure to the Chinese economy is Yum Brands’ spinoff Yum China, which operates KFCs, Pizza Huts, and Taco Bells among other restaurant establishments in China.
While YUMC, like most Chinese stocks, is subject to auditing by the SEC under the Holding Foreign Companies Accountable Act (HFCAA), it is more likely to comply as a franchiser of American restaurants.
Yum China stands to benefit from a China reopening with a large presence among its KFC and Pizza Hut franchises specifically. There are over 8,000 KFC locations across more than 1,600 cities in China with 2,500 Pizza Hut locations in over 600 Chinese cities.
Image Source: Zacks Investment Research
Yum China’s stock currently lands a Zacks Rank #2 (Buy) with earnings estimate revisions trending significantly higher for its current fiscal 2022.
Earnings are now projected to decline -13% for 2022 at $1.05 per share but this is up from estimates of $0.92 a share last quarter. Plus, FY23 earnings are expected to rebound and jump 56% to $1.64 per share although estimates have slightly gone down.
Image Source: Zacks Investment Research
On the top line, sales are forecasted to decline -2% for FY22 but jump 14% in FY23 at $11.04 billion. Even better, FY23 would be a 25% increase from pre-pandemic levels with 2019 sales at $8.77 billion.
Image Source: Zacks Investment Research
Bottom line
Starbucks and Yum China looked poised to benefit from the reopening of the Chinese economy and should be safer investments in terms of volatility and SEC regulations. Both companies’ top and bottom lines should appreciate significantly as China’s Zero-Covid restrictions have eased and hopefully improves their future performances and valuation as well.
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2 Stocks to Buy For "Safer" Exposure to China
With many Chinese stocks continuing to rise, investors are becoming more intrigued at the possibility of adding exposure to China again. Still, the volatility among Chinese equities over the last few years has soured a lot of investors from wanting to invest directly in Chinese companies.
However, here are two stocks that may be “safer” investments after mainland China has mostly ended its Zero-Covid policy and reopened the economy.
Starbucks (SBUX - Free Report)
The first stock on the list is a very familiar name. Starbucks has over 6,000 stores in China, but its headquarters and upper management is in Seattle, Washington.
Starbucks will get a significant boost from mainland China reopening. In fact, at the end of the company’s most recent fiscal fourth quarter, the U.S. and China comprised 61% of Starbucks’ global portfolio with 15,878 stores in the U.S. and 6,021 stores in China.
Image Source: Zacks Investment Research
As mainland China continues its Zero-Covid recovery and reopening it is quite plausible that earnings estimates will continue to rise for Starbucks stock. For now, Starbucks lands a Zack Rank #3 (Hold).
Starbucks earnings are currently expected to climb 15% in fiscal 2023 and jump another 17% in FY24 to $4.01 per share. Even better, earnings estimate revisions have steadily trended higher over the last 90 days for both FY23 and FY24.
Image Source: Zacks Investment Research
Sales are projected to be up 11% in FY23 and rise another 11% in FY24 at $39.85 billion. More importantly, fiscal 2024 would represent 50% growth from pre-pandemic levels with 2019 sales at $26.50 billion.
Image Source: Zacks Investment Research
Yum China (YUMC - Free Report)
Another more “trustworthy” investment for exposure to the Chinese economy is Yum Brands’ spinoff Yum China, which operates KFCs, Pizza Huts, and Taco Bells among other restaurant establishments in China.
While YUMC, like most Chinese stocks, is subject to auditing by the SEC under the Holding Foreign Companies Accountable Act (HFCAA), it is more likely to comply as a franchiser of American restaurants.
Yum China stands to benefit from a China reopening with a large presence among its KFC and Pizza Hut franchises specifically. There are over 8,000 KFC locations across more than 1,600 cities in China with 2,500 Pizza Hut locations in over 600 Chinese cities.
Image Source: Zacks Investment Research
Yum China’s stock currently lands a Zacks Rank #2 (Buy) with earnings estimate revisions trending significantly higher for its current fiscal 2022.
Earnings are now projected to decline -13% for 2022 at $1.05 per share but this is up from estimates of $0.92 a share last quarter. Plus, FY23 earnings are expected to rebound and jump 56% to $1.64 per share although estimates have slightly gone down.
Image Source: Zacks Investment Research
On the top line, sales are forecasted to decline -2% for FY22 but jump 14% in FY23 at $11.04 billion. Even better, FY23 would be a 25% increase from pre-pandemic levels with 2019 sales at $8.77 billion.
Image Source: Zacks Investment Research
Bottom line
Starbucks and Yum China looked poised to benefit from the reopening of the Chinese economy and should be safer investments in terms of volatility and SEC regulations. Both companies’ top and bottom lines should appreciate significantly as China’s Zero-Covid restrictions have eased and hopefully improves their future performances and valuation as well.