Chinese IPO stock ZTO Express (ZTO) is building a flat base with a 21.80 buy point. Shares advanced 5% Thursday amid the easing of new trade war fears between the U.S. and China. However, volume was noticeably below average. Still, shares are near a potential breakout.
Quarterly revenue growth accelerated over the last four quarters, topping out at 48% in the most recent period. Meanwhile, earnings growth accelerated over the past two quarters. Accelerating earnings and sales are bullish fundamental metrics.
Consensus estimates show the firm’s annual earnings this year growing 25% to 85 cents per share and another 24% in 2019.
Early Wednesday, Goldman Sachs upped its price target on the stock from 19.30 to 23.70. The current 12-month price target is a nearly 18% premium to Wednesday’s midday price around 20.10. The analysts believe that ZTO’s scale leadership, network stability and low-cost advantage “will enable ZTO Express to continue to expand its No. 1 position in China’s intercity express parcel market over the next few years.”
The Stock Chart
ZTO Express launched higher on May 24, when it broke out past an 18.18 buy point in heavy volume. Two days later, the stock rose nearly 20% from the buy point on news that Alibaba (BABA) and its logistics arm invested $1.38 billion in ZTO Express. Since then, the stock has quietly traded sideways, resulting in a new flat base.
The stock’s action is particularly notable given the recent weakness among fellow top Chinese stocks. E-commerce giant Alibaba is lingering under its 50-day line after triggering the 7%-8% sell signal from a 201.60 double-bottom entry.
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