W
e highlight a bullish thesis on KE Holdings Inc. (NYSE:BEKE) from ValueInvestorsClub by Weighing Machine Capital, which we'll summarize below. At the time of publication, BEKE shares were trading at $20.25, while the closing price on Mar 07 was $24.26.

    KE Holdings operates a comprehensive online and offline platform for housing transactions and services in China, covering over 100 cities with 45,000 stores and nearly 50 million monthly active users. The company's integrated offerings include financing, home renovation, and community development, giving it a competitive edge over rival Anjuke.

    The industry is favorable for big players like BEKE, which has leveraged digital transformation to access more customers. Online penetration is expected to reach 50% by 2030, up from 15% in 2024, while policies have been relaxed, including lower interest rates and reduced tax burdens. This will give BEKE access to more inventory and increase transaction volumes.

    BEKE trades at a relatively low earnings multiple of 20x, with an Enterprise to Gross Profit ratio of 5.5x, significantly lower than its peers. Improving profitability justifies a higher multiple of 25x, putting the fair value of the stock between $31-32, representing a potential gain of 33% from its current price.

    While acknowledging BEKE's investment potential, we believe some AI stocks hold greater promise for delivering higher returns within a shorter timeframe. If you're looking for an AI stock with similar growth prospects but trading at less than 5 times earnings, consider our report on the cheapest AI stock.