Why Full Truck Alliance, UP Fintech Holding and RLX Technology Stocks Are Soaring Today

What happened

Shares in some Chinese stocks rose on Wednesday as investors reacted positively to earnings reports. The market has also turned more optimistic on the country’s businesses, despite lingering concerns about its efforts to tackle COVID-19.

Shares in the operator of a digital freight platform Complete truck alliance (YMM 13.11%) were trading more than 13% higher as of 12:36 p.m. ET. Meanwhile, stocks from online brokerage UP Fintech Holding (TIGR 9.80%) were up almost 8% and shares of Vaping Company RLX technology (RLX 19.82%) was up almost 20%.

so what

For the third quarter, Full Truck Alliance reported adjusted earnings per American depositary share of $0.07 on total revenue of more than $254 million, both numbers exceeding analyst estimates.

Red line moving up next to wooden houses.

Image source: Getty Images.

The company filled 33.5 million orders in the quarter, down 5.4% year over year. The average number of monthly active shippers on the platform increased 15.2% year over year to 1.85 million.

“In the face of weak seasonal demand and strong macro headwinds, we delivered solid third quarter results driven by our powerful digital freight platform and operational excellence,” said CEO said Peter Hui Zhang in the press release on the result.

For the fourth quarter, Full Truck Alliance is forecasting net sales of up to $260 million.

UP Fintech also reported Q3 results Wednesday morning with adjusted earnings per US depositary share of around $0.04 on total revenue of $55.4 million. Sales beat analyst estimates.

During the quarter, UP Fintech’s customer base with deposits grew more than 23%, even though total account balances are down nearly 37% year over year and total margin financing and securities lending are down more than 48% year over year.

While investors remain generally concerned that China’s zero-COVID policy of responding to outbreaks with lockdowns and intense restrictions could hurt the country’s economic growth, many experts believe Chinese stocks have bottomed out, or at least bottomed out approaching the valley bottom. Hong Kong’s benchmark Hang Seng index has fallen nearly 25% this year.

“In terms of fundamentals, I think the worst is probably behind us [the sector]’ said Vivian Lin Thurston of William Blair Investment Management, according to Bloomberg. “The growth of these companies may not be as strong as it has been over the past decade, but it’s still very solid and likely cheaper than other sectors in China. The investment opportunities are very interesting and attractive.”

What now

It’s been an absolute rollercoaster ride for Chinese stocks since the pandemic began. They are dealing with a struggling Chinese economy and a regulatory environment that has recently shifted from very restrictive to more relaxed as the government pursues policies aimed at boosting economic activity. But the Chinese government’s unpredictable behavior on this front makes investments there more difficult to value.

I think many of these Chinese companies have strong potential given the size of their potential markets, but the behavior of the Chinese stock market has been too volatile for me to really follow.

When evaluating opportunities, I’d be on the lookout for Chinese companies, which are larger, more established and likely to attract less attention from the country’s regulators. For example, the Chinese government recently imposed a 36% tax on the production or import of e-cigarettes. That will certainly harm RLX Technology.

Of these three names, I tend to prefer Full Truck Alliance, and I really like its concept, but I’d still recommend any investor to carefully consider the company’s regulatory environment before buying the stock.

Bram Berkowitz does not hold any of the shares mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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