Shares of Hong Kong-based digital broker and wealth management platform Futu Holdings (NASDAQ:FUTU) traded more than 9% lower as of 3:07 p.m. EDT for no obvious reason.
Chinese stocks that list on U.S. exchanges face considerable risk from regulators in China, which can flip the script quickly on what looks to be a strong company in the attractive Hong Kong or Chinese markets.
Take another Chinese fintech company, KE Holdings (NYSE:BEKE), which has seen shares plummet more than 54% over the last month. As the largest real estate platform in China, the company has run into trouble directly related to actions taken by the Chinese government on the country’s housing market.
KE management recently issued third-quarter guidance of total net revenue between $2.2 billion and $2.4 billion, representing a decrease of approximately 24.6% to 29.4% from the same quarter of 2020. Analysts have also soured on their price targets for KE Holdings, with some bringing estimates down $50 to $60.
The good news for Futu is that as recently as two days ago, analysts had given the company a consensus rating of buy and an average one-year price target of $191, which implies substantial upside considering shares currently trade around $91.
However, as we saw with KE Holdings and many other Chinese stocks, things can change very quickly, so keep that in mind. Futu reports second-quarter earnings on Aug. 31, which could prove to be a big catalyst for the stock.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.
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