Chinese EV giant BYD (BYDDF), also tracking under the ticker (BYDDY) via the TipRanks platform, presents one of the most compelling return opportunities on the U.S. stock market, mainly due to its significant undervaluation stemming from the well-known “China discount.” While macroeconomic and geopolitical risks associated with investing in China are real, they appear to be already factored into the stock price. Even a modest improvement in sentiment—such as progress in improving U.S.-China relations—could unlock substantial upside. Given this dynamic, I remain confidently Bullish on BYD.
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BYD Stock is a Textbook Value Investment
For investors seeking stocks with raised exposure to macroeconomic themes, while attaining high market-beating returns, BYD ticks almost every box. The stock’s forward P/E ratio is 18.5, compared to 17.5 for the sector, yet BYD’s forward diluted earnings per share growth is 36% compared to just 6.5% for the sector. That indicates a massive undervaluation. All of that extra earnings growth for essentially the same P/E multiple is nothing other than a bargain.
The geopolitical dynamics driving BYD’s discount reflect broader uncertainty around global trade policy and shifting political influence. However, any aggressive moves by the U.S. are likely to be met with retaliatory measures from China, making it unlikely that American equities will thrive while Chinese equities continue to deteriorate. This mutual vulnerability creates a kind of geopolitical equilibrium, which in turn helps stabilize the long-term return outlook for Chinese stocks like BYD.
Over the past five years, BYD stock has delivered a price return of over 400%, with a nearly 60% return in the last year alone. When compared to broader indices like the S&P 500 (SPY), BYD’s performance is clearly stellar, notching a 400% surplus over the U.S. average.
While past performance is no guarantee of future results, this clearly demonstrates that BYD is rewarding shareholders through powerful financial returns from its pioneering strategies, which enable it to remain at the forefront of electric vehicle technology.
BYD stock is cyclical, and it experiences periods of both negative and positive free cash flow. However, this is a natural phenomenon that opens up buying opportunities amid temporarily lower valuations. The company’s forward financial projections indicate a substantial likelihood of 30% year-over-year normalized earnings growth in Fiscal 2026, as well as revenue growth of approximately 15% per annum for the next two years. This is somewhat slower than Fiscal 2025’s enormous financial returns, but the valuation is low relative to the sector, and such a strong future growth outlook warrants buying now.
U.S.-China Relations Must Improve to Lift Sentiment
If the Trump administration adopts a more cooperative stance with China, we could see lower risk premiums applied to Chinese equities, such as BYD. Moreover, if the cooperative trade relationship between the U.S. and China remains stable over the long term, there’s a strong likelihood that capital flows from Western investors into Chinese stocks will increase significantly. The art of great macro investing is predicting capital flows, and I believe that certain high-class Chinese stocks are currently in a limbo period before a positive sentiment inflection amid more stable geopolitics.
However, we should give credence to the counterargument, which is that the current calm between the U.S. and China ends on August 12. If the Trump administration decides to hike tariffs to 100% or higher again, this could indeed mark the start of a more protracted effort for the U.S. to neutralize China. Equity markets on both sides of the divide would likely contract as a result. Even in the event of broad international market volatility stemming from a trade war, China may face gradual long-term setbacks if its access to global markets is increasingly restricted through coordinated efforts by Western allies to contain its economic influence.
That said, China controls key rare-earth minerals that are essential for advanced semiconductors and other high-tech applications. Therefore, we cannot expect the U.S. to completely sever its ties with the Eastern superpower. Additionally, if the U.S. pushes its aggressive stance toward China too far on the trade front, China could make a military move against Taiwan, which would send markets into a tailspin.
Therefore, the most prudent approach for Donald Trump is to pursue a policy grounded in diplomacy—or at the very least, one that maintains a balanced stance. Re-escalating tensions would be an impractical choice, given the significant long-term risks and the likelihood of heightened short-term market volatility.
Given these dynamics, I believe that stronger U.S.-China relations are likely in the short to medium term. As a result, I expect Chinese equities to begin thriving more than they have in the past. A valuation re-rating based on heightened international inflows into BYD stock is the foundation of my bullish stance on the stock.
Is BYD Stock a Buy, Sell, or Hold?
On Wall Street, BYD stock has a consensus Strong Buy rating based on nine Buys, zero Holds, and zero Sells. The average BYDDF stock price target of $23.13 indicates almost 36% upside potential over the next 12 months.
This presents a strong return opportunity and aligns with my proprietary view that BYD offers a compelling combination of robust financial growth potential and an attractive, undervalued entry point for investors.
BYD Stock Positioned for Upside via Geopolitical Rebound
BYD stands out as a compelling investment opportunity, demonstrating strong fundamentals and effective competitiveness in a saturated electric vehicle market. At its current valuation, the stock is well-positioned to benefit from any positive shift in global investor sentiment toward China, potentially resulting in outsized returns. Given these dynamics, BYD presents a strong case for medium- to long-term investment, contingent on continued financial performance and improved geopolitical conditions.