Motley Fool Money - Bull vs Bear: Chinese Stock Showdown

Episode Date: November 18, 2025

Chinese stocks are back in the headlines, and we’re putting them on trial. Motley Fool Money flips the script as Jason Hall steps into the host chair to referee a fast-paced bull/bear debate between longtime China investor Emily Flippen and resident skeptic Toby Bordelon. On today’s show, Emily, Jason, and Toby: - Go head-to-head on PDD Holdings - Debate whether Baidu can self-drive its future - Do a speed round between Weibo and iQiYi - deep value or value traps? Companies discussed: BIDU, PDD, WB, IQ Host: Emily Flippen, Jason Hall, Toby Bordelon Producer: Anand Chokkavelu Engineer: Dan Boyd Disclosure: Advertisements are sponsored content and provided for informational purposes only. The Motley Fool and its affiliates (collectively, “TMF”) do not endorse, recommend, or verify the accuracy or completeness of the statements made within advertisements. TMF is not involved in the offer, sale, or solicitation of any securities advertised herein and makes no representations regarding the suitability, or risks associated with any investment opportunity presented. Investors should conduct their own due diligence and consult with legal, tax, and financial advisors before making any investment decisions. TMF assumes no responsibility for any losses or damages arising from this advertisement. We’re committed to transparency: All personal opinions in advertisements from Fools are their own. The product advertised in this episode was loaned to TMF and was returned after a test period or the product advertised in this episode was purchased by TMF. Advertiser has paid for the sponsorship of this episode. Learn more about your ad choices. Visit ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠megaphone.fm/adchoices Learn more about your ad choices. Visit megaphone.fm/adchoices

We're flipping the script today on Motley Fool Money as we put our bullhorns on and sharpen our bear claws to dig into Chinese stock earnings. It's Tuesday, November 18th. Welcome to Motley Full Money. I'm your usual host, Emily Flippen, but today we're putting full contributor Jason Hall in the big chair so that you, Jason, can help facilitate a fun debate today between myself and full analyst Toby Bordelon. Emily, I am never short on opinions. We know that, But on Motleyful Money is a good idea to align those opinions with expertise. And this morning, we have earnings from four of the largest Chinese companies. And I know that you, you lived in China for four years.

You have plenty of bullish thoughts that can be backed up with actual knowledge and expertise. So we thought it would be fun to match you up with our notorious Chinese stock skeptic, Toby Bordelon, to have a bit of a fast-paced bullbear debate. We'll get to ICHE, Weibo, and Baidu later. But first, let's start with a stock that you actually own in your portfolio. And that's PDD Holdings, ticker symbol, is PDD, formerly known as Pinduadro. It's an e-commerce powerhouse. Shears are down today after what seemed like a pretty solid quarter.

Emily, is this a buying opportunity? I actually do think it's buying opportunity, Jason. Now, to your point, I do own this in my personal portfolio. So I'm arguably a little biased here. But this was a solid quarter. Revenue growth wasn't anything to write home about, but it was in line. with what the company was expecting, given the fact that they are operating in a more competitive and admittedly tarifforded an environment. But the reason I like this company is because of its business

model. I mean, virtually everything flows through to the bottom line with this business. PDD on both its Penduodeau marketplace in China, as well as its TEMU marketplace that serves the global audience, doesn't generally own the inventory that it lists. It's just like the payment, infrastructure, and logistics platform. And on its Chinese side, a majority of the revenue come from ad placements. So PDD Holdings was able to grow profits at nearly 20, twice the rate of revenue in the quarter, even with all of the craziness going on with issues of drop shipping and their removal of de minimis in the United States. It has nearly 25% net income margins over the past year. I'm so compelled by this opportunity. I can feel your

energy here. But Toby, I have a feeling you may be a little bit less glass-half-full than Emily is. Yeah, look, I got to be honest here. I'm not sure I would call 9% growth solid for a company like this. It's an e-commerce platform and a theoretical. a fat-growing Chinese consumer economy, right? 9% ain't going to cut it because it's not meeting investors' expectations here. If they can't get the growth rates up, I think the valuation multiples are going to come down. They're going to come down fast.

My other problem here is the heavy spending they're doing. Management even went so far as to warn that profits are going to fluctuate due to things like higher marketing costs, merchant subsidies, investment in the platform. It's looking like a lot of what they expect this growth to be is going to be a lot more expensive going forward. And it signals the platform may not be very sticky for consumers. Oh, my gosh, Toby, you think the valuation multiples are going to come down? I mean, okay, this business has a market cap of somewhere like $180 billion U.S. dollars. Nearly $60 billion of that is in cash.

So it has an enterprise value to EBITA of less than 10 times while growing its bottom line earnings per share, double digits. I mean, even if the top line is only growing 9%, that's downright cheap. That's too cheap to ignore. Now, look, it's only cheap with the assumption that you're going to get a rebound on those growth rates, right? If we are in a permanent growth decline, the market is going to reset to a lower valuation at some point. From a platform and business investment standpoint, this could be a money pit, not a growth opportunity. And the bigger picture, Emily, I think, is we don't know what's driving these results. What's the TEMU contribution versus PPD?

Who knows? What's the platform gross market value? No idea. Gross market volume. No idea there. What's the retention rate? The take rate. There's no disclosure with these things, right? Chinese companies, let's put it this way, they historically do not have the best reputation in terms of keeping all the numbers on the up and up. And it refused to share the details on these things. It doesn't give me a lot of confidence in what's really going on here. Yeah, I think that's fair. I never get the full color that I want from Chinese companies and can feel a little criminal about the fact that they don't even give reportable segments when it comes down to what sales come from Team versus the Pendle-Dwell

marketplace. We disagree, but still, I think the valuation is considerable for maybe more risk-tolerant investors. Friends, this is what makes a market right here. Love the foolish disagreement. Up next, we're figuring out if Baidu's autonomous car business can help drive it, self-drive it, to a successful future. Stick with us. If you're early in your career and looking for insight, inspiration, and honest advice, listen to the Capital Ideas podcast, hear from Capital Group professionals about leaning into the differences that make you unique, making decisions that last, and what it means to lead with purpose. The Capital Ideas Podcast from Capital Group, available wherever you listen, published by Capital Client Group, Inc. Welcome back to Motley Fool

Money. Chinese stocks can be a non-starter for many investors, especially if you're talking about Chinese small caps. But Baidu, ticker BIDU, is one of very few exceptions for those that still want to invest in China, but with less risk. It's been described as the alphabet of China. Baidu has made a name for itself in search, advertising, and its quote-unquote other offerings like self-driving. But similar to its American counterparts, Baidu has been under fire for fears that AI could upend its search and related advertising businesses. Toby, did Baidu's latest results give any clues about how it's navigating those concerns? They did not, Jason, at least not in my opinion.

I don't reinforce the belief that Bidu isn't doing it very well. Revenue is falling a little bit. That's kind of problematic for a supposedly dominant platform in their market. And Bidu has not done a great job of diversifying its revenue sources. It's really very ad-dependent still, and that core ad business is shrinking. That's in contrast to some of the U.S. tech giants who have had similar issues, right when AI first burst on the scene. But their ad revenue is growing for the most part.

Cloud AI revenue for ByDU is not yet large enough to offset the decline they're seeing. And that's a problem. Worsening, right, overall margins are under serious pressure because the parts of the business that are growing, right, that they're investing in, are lower margin, meaning they've got to grow faster offset the bottom line impact. Toss on concerns about the overall macro economy in China. And Baidu is just not that compelling to me. Now, you might say, look, hey, the thesis here is AI growth, right? I get that, maybe.

But management is telling us don't expect serious returns there anytime soon, right? So we've got a declining core business, a low-margin growth business, and an uncertain future of what AI could, if it does become a meaningful growth driver here, what it could be and how profitable it's going to be at scale. For me, the upside here is just not justifying the risk I see. Okay. Toby's right. You can't fight.

Okay, guys, thanks for listening to Molly for many. We'll see you tomorrow. Yeah, unfortunately, you can't fight with the headline numbers here, which is Toby is right. The ad market in China right now, it's bad across the board. And by due in particular, its dominance in search, especially, it's having the alphabet problem, which is it's still there, but they're losing ground. They're losing market share. And revenue is falling.

And its core business is ad placement. And that's just been incredibly weak for this company. But I do think we are starting to see some return on investment for these initiatives. And while that hasn't made up for that core business falling, I think we're starting to see what the scale could be if Baidu does eventually get there. And in addition to their search business, of course, they're also a leading cloud infrastructure provider in China. So you can think a little bit like AWS here in the United States.

And their subscription-based AI solutions grew 128% year of year. Now, these are solutions that were and are really expensive for Baidu to build out initially, but it seems like that scale is starting to come. So it's possible that a lot of the expenses, a lot of the costs that we saw Baidu experience over the last couple of years are going to be largely behind us now as Baidu looks to be slightly more profitable future. And while management hasn't necessarily guided for that yet, I do think that they can't eventually move in that direction.

So the counter you're saying is that what we're seeing is lower margin. in that growth business should start to improve as scale ramps up? It's possible. And I hesitate only because we haven't heard management come out and outright say that. Whereas I think if we saw that going to happen over the course of, say, 2026, management would be very clear in terms of the guidance that they expect to come in. And to Toby's points, a lot of the commentary we're getting for management are just a rather AI initiative. All of these other different pies that Bidu's fingers are stuck in right now. And we don't see the actual tangible outcomes coming up from these initiatives yet. But I think it's entirely

possible that over the course of the next five years, over the course of say the next 10 years, that all it takes is one of these pies to bake particularly well to more than make up for the core search business, even at that core search business, does continue to decline. And I actually think that the area that this could be that doesn't get nearly enough investor attention is self-driving solutions. And we talk about Tesla and others. They get all the headlines about robo-taxies. But, oh my gosh, Baidu has self-driving robotaxies already in operation and 22 cities across the world. In many locations, this is 100% fully driverless, actual commercial services being used by the Chinese public on a daily basis. This is not in a controlled environment.

This is not something that is otherwise being heavily scrutinized or regulated. This is just a part of everyday life. And I think the fact that Baidu, an opportunity that being a leader in Robotaxies has, gives a lot of home country bias because American investors just don't see that the way we see it with Waymo or Tesla. Yeah, my big concern here, you're right. There is potential, but big picture, if you have to be a lot more optimistic than management is being to make a reasonable wool case, I feel like that's a sign there are probably better

opportunities elsewhere for your investment capital. What can I say, Toby? I'm an optimist at heart. Got to love it. All right. next we're quick firing on two smaller Chinese stocks still trying to find their place in the world and after quite a long time for at least one of them we've got weibo and i chi e next right after this quick break these days i'm all about quality over quantity especially in my closet if it's not

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model that's kind of similar to Netflix, only it's struggled to retain growth. So, not very much like Netflix. Now, both businesses are compared to failures when stacked up next to Bidu and PDD holdings. Toby, when you look at either of these two companies, does one stand out as redeemable to you, or do you think both are uninvestable? Honestly, Jason, I'd stay away from both of them. Once upon a time, I actually had a very small investment in ICHE, but I gave up on that when it was clear that this was going nowhere. Bidu already owns 45% of that business.

So if you really, really want to invest in it, you could just do it that way. As it turns out, it's been terrible from Bidu too. It's been dragging them down at a time where they really don't need any other drags on their business, as we've already discussed here. IGE is losing money on an operating basis. I've got no expectations. That changes anytime soon, honestly. All right, Emily. So I've got a side with Toby a little bit here. He hinted at it, but there's some math that screams caution at me about IG. It spent more money paying interest last year than it earned an operating income. That's tough to dig your way out of that. So what's the bullcase that it can see its way forward in a way where investors actually make money?

I hesitate again to say that. Yes, you're right. Again, these are right at face value. And I certainly have my work cut out to me to make a bull case for either of these businesses. But I love to play devil's advocate. And to your point, Jason, two sides do make a market. They're a lot less clear cut than Baidu or PDD. But I try to see the forest through the trees. In the case of ICHE, the financial risk of the debt and the lack of profits are basically non-existent for exactly the reason Toby mentioned. They're fully backed by the cash-generating giant that is Baidu. By-du, in my opinion, really let this company fail. And ICHE does have some really valuable properties. Unlike other apps, there isn't a clear competitor to ICHE and Chinese streaming. So I could draw

comparisons between them and Netflix in the past, right? Getting up to speed in original content and scale in a country with billions of people, it's hard, it's expensive, maybe they just need more time here. And I think the risk of bankruptcy given their financial profile is still low with such smart backing. Okay, let's move on to Wey Blot. Toby, based on your comments, I assume you think investors should pause here and move on to, right? Yeah, yeah. That's been my trend for this show. There's a theme, people.

I think. Yeah, right? Look, honestly, I think there are better options elsewhere. Look at Wave. Why, ad revenue is declining. That seems to be a trend with Chinese companies generally right now. It makes you wonder about the short-term state of that region's economy, quite frankly. But there's nothing really unique with this business, Jason.

There's no compelling reason for consumers to stay on the platform. Users are heading to other platforms in droves here. And honestly, I, I think investors would be well served to do the same. Emily, I hate to do it again, but taking Toby's side, this is a smaller, less profitable business than it was seven years ago. Yet another bad quarter. Is there anything redeemable?

I compare Weibel to maybe even a business like eBay, where, yeah, you can make the argument, does this company really need to exist? But there's probably still a lot of leverage that management can do with what is otherwise a very profitable, very cash-generating assets. They are losing out on ad dollars. to competition, like Red Note, of course, and the platform is declining of popularity. But management team seems aware and kind of okay with that. They still have hundreds of millions of monthly active users, and they monetize decently well. They have operating margins north of 27 percent in

the most recent quarter, so much cash that they're actually doubling their operating income just based off the interest income. They're generating off of their cash sitting there in their bank accounts. So on a price to earnings basis, the business is trading at a PE ratio of five times. So quite literally, price like the company is going to disappear in the next decade. Is that possible? Yes, of course it's possible. I think this does not pass David Gardner's snap test. I think if you snap your fingers, it's entirely possible. You can replace Weibo with a medley collection of other social media platforms. But with oodles of cash flow, hundreds of millions of dollars of super low cap-ex and reinvestment expenses, I think if they can just figure out how to better monetize users that

exist on their platform, this could be an underappreciated opportunity. All right. This has been a lot of fun, Toby, Emily. Thank you. both so much for having this fun conversation. Emily, I'm going to go and hand you the keys back, and you can drive us home. Yes, Jason. Thank you so much for coming in and playing host and allowing me to, you know, I guess entertain you both. For Chinese companies that reported earnings this morning, yes, but also are opportunities that I think are sometimes going underappreciated or missed by opportunities. Jason, thank you for playing host. And Toby, thank you for playing the bear to my bowl for these opportunities. And listeners, thank you all so much for joining

Motley Full Money today. As always, people in the program may have interest in the stocks they talk about, and the Motley Fool may have formal recommendations for or against, so don't buy yourself stocks based solely on what you hear. All personal finance content follows the Motley Full editorial standards and it's not approved by advertisers. Advertisements are sponsored content and are provided for informational purposes only. To see our full advertising disclosure, please check out our show notes. For Jason Hall, Toby Bordaun, and the entire Motley Full Money team, I'm Emily Flippen. We'll see you tomorrow.