One of our top long-term stock picks, Bitauto Holdings Ltd. (NYSE: BITA) stock, is trading at a 41% discount this week.
BITA shares are trading at $56, down from the $95 they hit Jan. 9.
Shares of BITA stock dropped 16% March 9 even after the company reported a Q4 earnings beat. Q4 earnings were up 58% year over year, while revenue was up 101.7%.
The company announced diluted earnings per share (EPS) of $0.68 compared to estimates of $0.62. Quarterly revenue of $157.2 million topped projections of $124.4 million.
Despite those figures, American investors are still worried about the Chinese economy. That's led to the 2015 BITA stock sell-off.
In 2014, China's GDP growth slowed to 7.4% from 7.7% the year before. The IMF expects growth of 6.8% this year.
Investors are also panicking about slowing auto sales growth in China. For the first two months of 2015 sales of passenger vehicles in China grew 8.7%. In 2014, that number was 11%.
But this is an overreaction. China is still the largest auto market in the world, and it's still growing 8.7%.
That data has crushed Chinese stocks. The Nasdaq Golden Dragon China Index, which tracks Chinese companies trading in the United States, has dipped nearly 13% in the last six months.
The market slump is dragging down companies with strong financials. That's the case with Bitauto.
But Bitauto (NYSE: BITA) stock is one of the best long-term plays on the market now.
In fact, Money Morning's Defense and Tech Specialist Michael Robinson thinks it still has potential for another 50% gain within the next several years.
Here are the three reasons why BITA is a steal...
Why Bitauto (NYSE: BITA) Stock Is Buy Now
Bitauto is a $3 billion Chinese e-commerce company that operates like an online showroom for new and used car dealers. It sells online advertising and provides reviews and pricing data for consumers.
That makes it a play in one of the top industries for investors in 2015: the automotive market.
And right now, the automobile industry is experiencing a massive shift - one that Robinson describes as "the most exciting time I've ever seen in the industry."
"Connected cars" are now equipped with diagnostic sensors, Bluetooth devices, cameras, and voice command systems.
"Cars today have become high tech. They are brimming with advanced technology," he said. "A wide range of exciting new tech features - everything from advanced sensors to software to GPS to Web and Bluetooth integration - are helping the auto industry rack up new sales records."
Robinson says these three trends make the Chinese auto industry particularly exciting right now:
- Incomes and standards of living in China are rising. This is all a by-product of China's long-term move from communism to capitalism.
- China is in transition. State-sponsored infrastructure spending is declining. China is looking more to the open markets.
- The Chinese population is 1.3 billion people. Rising standards of living in urban centers are fueling demand for new vehicles.
And the best part for investors is BITA stock's ties to the Chinese e-commerce industry. It's a marketplace that Money Morning experts have been tracking for years - and it's providing one of the best profit opportunities in the world right now...
Chinese E-Commerce Fueling Bitauto (NYSE: BITA) Stock Now
In 2013, China became the world's largest e-commerce market reaching $298 billion. According to the research firm yStats, that was a 60% year-over-year increase. It also surpassed the $263 billion that was spent in the United States last year.
"According to the research I've seen, e-commerce in China is projected to hit $540 billion by 2015, and that's just for starters," said Money Morning Executive Editor Bill Patalon. "By 2020, China's e-commerce market will be worth more than the United States, the United Kingdom, Japan, Germany, and France combined. So we know that growth is coming."
A recent study by the China Internet Network Information Center (CNNIC) determined the number of Internet users in the country will hit 800 million by 2016 or sooner.
That's the best part about Bitauto stock, it's a play on two exciting markets: automotive and Chinese e-commerce.
And the critics who look solely at China's GDP numbers are missing the point.
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Over the next five years, EPS is expected to grow 45%. The rest of the industry is expecting growth of just 20.5% in the same period.
Revenue is expected to increase by 58.8% in the most recent quarter. Revenue should jump 41.5% for the full year 2015.
Robinson also points out the company's price/earnings to growth (PEG) ratio. A PEG ratio of 1.0 is considered fair value for a company. Right now, BITA has a PEG ratio of 0.84, meaning it is undervalued.
Robinson recommended Bitauto stock twice in 2014. First in Feb. 2014 at $29.66, then again in April at $35.33. At its highest price, investors banked a gain of 231%. Even after the sell-off, investors are up 89% on Robinson's recommendation.
Bitauto (NYSE: BITA) stock may pull back further in the short-term, but that shouldn't dissuade all investors.
"At this point, BITA remains a long-term buy but you have to realize these stocks are out of favor and do a staggered entry to protect yourself," Robinson said. "But again, over the long haul, BITA will pay off, and you can boost your returns by getting in now somewhere near the bottom."
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