Shares of Here Group, Zepp Health, Burning Rock Biotech and So-Young International all posted meteoric gains last year, but have given most of that back in 2026

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Key Takeaways:

  • A group of small- and midcap U.S.-traded Chinese companies that briefly notched sharp rallies over the last year have given back most or all of the gains
  • Investors may have been lured to the shares on belief they were undervalued, though their rise and fall also comes as the U.S. cracks down on suspected stock manipulation

What do collectible toys, wearable health devices, cancer tests and cosmetic surgery have in common?

Certainly not much, in terms of their business. But companies from all four of these areas were among a group we previously called "Chinese Easter Eggs," after their stocks suddenly soared last year, often rising many-fold in just months. Fast forward to the present, when the Easter Egg party is definitely over, and most of these stocks have given back nearly all their gains.

At the time of their meteoric rise, we said a newfound appreciation by investors might be behind the huge gains for collectible toy maker Here Group Ltd. (NASDAQ:HERE), wearable device maker Zepp Health Corp. (NYSE:ZEPP), cancer testing company Burning Rock Biotech Ltd. (NASDAQ:BNR) and cosmetic surgery company So-Young International Inc. (NASDAQ:SY). But based on the return to earth for all of their stocks, the rise-and-fall looks suspiciously like the type of manipulative speculation that has caused many U.S. investors to increasingly shun this group of smaller Chinese companies.

That's not to say these companies don't have interesting business models that are producing healthy growth. But the people buying their stocks appear less interested in the companies' stories, and more interested in making some quick money, similar to the GameStop (NYSE:GME) meme stock phenomenon of early 2021. While the GameStop story has long since faded from headlines, it appears to be living on in these smaller Chinese stocks.

The U.S. securities regulator and the Nasdaq, where most of these stocks are traded, are quite aware of this phenomenon and have taken steps to stamp it out. Most notably, the Nasdaq is implementing new rules that require all new Chinese listings to raise at least $25 million, and is aggressively delisting companies if the value of their listed securities falls below $5 million.

None of the four companies we mentioned looks to be in imminent danger of delisting under the new regime, though the rule changes have sent a chill over new listings by Chinese companies on Wall Street. No major new Chinese companies have listed in New York in more than a year, and new listings by smaller companies have also come to a near halt since the Nasdaq announced its new rules.

Here today, gone tomorrow

All that said, we'll take a closer look at the four China Easter Eggs we mentioned, including their recently released earnings for the first quarter.

All four are in a stage of transition, which is relatively common in the business world as companies constantly look for the next new growth engine. That story is most relevant for Here Group, which jettisoned its original adult education business and jumped into the pop toy business about a year ago, just as the global Labubu sensation was peaking.

That radical move was probably what excited investors. Here Group's stock soared nearly sevenfold from around $2 at the end of 2024 to as high as $13.50 a year ago, before returning to its previous levels at its latest close of $2.05.

The company's latest results show its pop toy pivot isn't going anywhere fast, with revenue down 7% to 165 million yuan ($24.4 million) in the three months to March from 177 million yuan in the previous quarter. That weakness prompted Here Group to lower its revenue guidance for its fiscal year to June to about 600 million yuan from a previous range of 750 million yuan to 800 million yuan. All of those figures are quite low compared with the company's pre-pivot annual revenue of 3.8 billion yuan in 2024.

Next there's Zepp, which has been transforming from a maker of wearables for other brands, most notably China's Xiaomi, to developing its own brands, led by its Amazfit product line. Zepp's story was a little more compelling than Here Group's, since the company already had plenty of experience in wearables, even if it was new to brand development.

Zepp was the biggest riser of all the China Easter Eggs, with its shares soaring from about $2.30 a year ago to as high as $61 last October, before falling back to their current level of around $5. The company is doing relatively well in its shift to branded products, though its latest report shows it expects its revenue growth to slow sharply to between just 6% and 14% in the second quarter after a much stronger 34% rise to $51.5 million in the first quarter.

Despite the slowdown, there's no question the branded business offers much better margins. The company's first-quarter gross margin came in at 37.7%, compared with figures in the 20% to 25% range before its business shift.

Falling revenue at Burning Rock

Then there's Burning Rock, which is shifting its focus from at-home cancer testing services to in-hospital testing following a government crackdown that affected the former segment. The company's stock was also a stellar performer in the Easter Egg rally, rising from just $3 a year ago to as much as $41 this January. It now trades at around $9, making it one of the best performers post-Easter Egg rally.

The company's latest results show its overall revenue fell 18.9% year-on-year in the first quarter to 108 million yuan, led by a 15.3% drop for its at-home testing services that use a central lab to process test results. Its in-hospital testing revenue, which now accounts for more than half of the total, also fell 8.5% for the quarter, though the company points out the figure would have risen 2% excluding a one-time issue involving two hospitals.

Lastly there's So-Young, which is transforming from a referral company for cosmetic surgery services to an operator of its own chain of surgery centers. Such a model provides better quality control in this sensitive sector, though its new business comes with much lower margins than simple referral services. So-Young's shares rose from about $1 a year ago to a high of about $6 last July, before falling back to their current price of about $2.

The company's latest report shows that business from its chain of clinics continues to grow rapidly, up 186% in the first quarter year-on-year to 282 million yuan. That more than offset a 34% decline for its information services, which fell to just 80 million yuan. But gross margin for the clinic operation business was just 27.1% in the latest quarter, compared with a much higher 92.0% for information services.

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Benzinga Disclaimer: This article is from an unpaid external contributor. It does not represent Benzinga’s reporting and has not been edited for content or accuracy.