Alibaba Stock Buy Or Sell ((HOT))
I maintain my Buy rating for Alibaba Group Holding Limited's (NYSE:BABA) [9988:HK] stock at this time. BABA's shares currently represent a good buying opportunity in view of the stock's valuation discount relative to its peers, its long-term outlook relating to future share repurchases, and the cloud business' growth potential.
alibaba stock buy or sell
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However, that earnings beat didn't bring the bulls back to Alibaba, and its stock remains more than 70% below its all-time high from October 2020. Is this a buying opportunity for investors who can look past its near-term challenges?
Based on those projections, Alibaba's stock looks historically cheap at 14 times next year's earnings. Its cloud and media rival Tencent trades at 23 times next year's earnings, while its American counterpart Amazon has a forward price-to-earnings ratio of 56.
Alibaba's valuation might limit its downside potential, but I don't see any reasons for the stock to take off this year. I'd keep a close eye on it, but I wouldn't rush to buy it when other high-quality stocks are still on sale.
Alibaba stock edged higher in premarket trading Thursday on reports the company is considering ceding control of some units as part of a proposed split-up announced earlier in the week. After a steep selloff, Alibaba stock surged Tuesday after the company said it plans to separate into six separate units. But is BABA stock buy now after a steep selloff?
A 6% intraday gain for Alibaba stock on Feb. 23 faded to a loss of 0.65% despite better-than-expected fiscal Q3 results. Adjusted profit rose 5% to $2.79 a share, well above the $2.37 consensus. Revenue fell 6% to $35.9 billion, slightly ahead of the $35.76 billion consensus.
Sellers hit Alibaba stock hard on Jan. 30 on reports the company is moving its headquarters out of the country. At the time, Alibaba acknowledged that it's building a new campus in Singapore. But BABA said the facility would house regional operations.
Buyers pushed Alibaba stock higher on Jan. 13 on news that China bought a small stake in an Alibaba unit based in Guangzhou. The news came two days after Barclays maintained an overweight weighting on Alibaba stock and lifted its price target to 141 from 114.
Alibaba stock extended its winning streak to five sessions on Jan. 9 on news that Alibaba co-founder Jack Ma ceded control of fintech Ant Group, which has been in the crosshairs of Chinese regulators. China's central bank on Friday said it was done investigating Ant Group. This paves the way for Ant to apply to become a fully regulated financial holding company.
But regulatory fears for Chinese stocks like Alibaba have been abating. A top Chinese regulator recently said the country is close to wrapping up investigations into internet platform operators like Alibaba.
Sentiment was weak around Chinese stocks in October after the Biden administration announced new restrictions on China's access to U.S. semiconductor technology, including restrictions on the exports of some types of chips used in supercomputing and artificial intelligence. It also imposed tighter rules on the sale of chip equipment to China.
As part of its Nov. 17 earnings report, which showed adjusted profit up 5% year over year to $1.82 a share but revenue down 6% to $29.1 billion, BABA said it's increasing its share buyback program by $15 billion. That's on top of an existing $25 billion program. As of Nov. 16, the company said it already repurchased $18 billion worth of stock under its existing program.
Increased regulatory scrutiny has weighed on Alibaba and other Chinese stocks for the past couple of years. Besides a strict regulatory environment, Chinese stocks have also been dealing with a slowing economy.
In April 2020, China regulators fined Alibaba $2.8 billion after an antimonopoly probe. At the time, it looked like BABA stock was ready to break out of a downtrend. But the stock got turned away at its 50-day moving average. It tried to rally above the 50-day line again in late April but sellers knocked the stock lower again.
A stock's relative strength line, found in daily and weekly charts at Investors.com, compares the stock's daily price performance to the S&P 500. An upward-sloping RS line means the stock is outperforming the S&P 500. A downward-sloping line means the stock is lagging the S&P 500.
A decisive move above the 50-day line on Nov. 15 was enough to break BABA stock out of its downtrend and give a buy signal. But the stock started to look extended after soaring 19% during the week ended Dec. 2.
Alibaba (BABA) has taken investors on a wild ride since its IPO in 2014. China's top e-commerce and cloud platform company initially dazzled investors with its robust growth rates, and its stock hit an all-time high of $317.14 in October 2020. But over the following two years, Alibaba's stock was crushed by an antitrust probe and fine, new restrictions on its e-commerce business, COVID-19-related lockdowns, and other macro headwinds in China. It also faced the threat that its stock would be delisted from U.S. exchanges.
Today, Alibaba's stock trades at about $87, which is still above its IPO price of $68 per share but well below the range where it traded in its heyday. It also looks historically cheap at 9 times forward earnings, but investors still seem reluctant to buy the stock.
Last month, I said Alibaba might be a worthwhile investment if it faced fewer regulatory headwinds, the Chinese government relaxed its draconian zero-COVID policies, and the Chinese economy stabilized. So are the scales gradually tilting in favor of the bulls or the bears? Let's review three new reasons to buy Alibaba -- as well as three reasons to sell it.
The bulls might be interested in buying Alibaba's stock again for three reasons. First, the three-hour meeting between U.S. President Joe Biden and Chinese President Xi Jinping at the G-20 summit in Bali on Nov. 14 was widely seen as a positive step toward reducing the economic and political tensions between the two nations, which had intensified significantly after Speaker of the House Nancy Pelosi visited Taiwan in early August.
A de-escalation of those tensions might help bring some value-seeking investors back to Chinese stocks again, and Alibaba -- the bellwether of China's retail and tech sectors -- could regain some of its former popularity.
Lastly, the Chinese government recently began allowing U.S. regulators to review Chinese audits of companies based in Hong Kong and mainland China. Under a law enacted in the waning days of the Trump administration, U.S. regulators have been threatening to delist any Chinese companies that refuse to open their books to overseas auditors for three consecutive years. Previously, Beijing had refused to allow the required audit data to be shared with non-Chinese firms based on its own regulations, so this concession might enable top Chinese stocks like Alibaba and Baidu to remain on U.S. exchanges.
Those positive developments make Alibaba's stock look a bit more attractive, but the company is certainly not out of the woods yet. Three other recent developments suggest it's still too early to bet on its long-term turnaround.
Lastly, Alibaba's co-founder Joseph Tsai is reportedly in talks to sell 8% of his stake in the company, which would be worth about $260 million. Tsai is the company's third-largest stakeholder after SoftBank and co-founder Jack Ma, and it seems odd that he would sell so many shares with the stock down by nearly 70% over the past two years.
Alibaba's outlook could improve as China loosens its COVID restrictions, and the stock could benefit once the delisting threat from the U.S. is addressed. But it still faces cutthroat competition in China's e-commerce market. Furthermore, its growth still might be hampered by tough regulatory restrictions. As the bear market in tech drags on, investors should stick with more promising growth stocks instead of Alibaba.
The Style Scores are a complementary set of indicators to use alongside the Zacks Rank. It allows the user to better focus on the stocks that are the best fit for his or her personal trading style.
Within each Score, stocks are graded into five groups: A, B, C, D and F. As you might remember from your school days, an A, is better than a B; a B is better than a C; a C is better than a D; and a D is better than an F.
As an investor, you want to buy stocks with the highest probability of success. That means you want to buy stocks with a Zacks Rank #1 or #2, Strong Buy or Buy, which also has a Score of an A or a B in your personal trading style.
Zacks' proprietary data indicates that Alibaba Group Holding Limited is currently rated as a Zacks Rank 3 and we are expecting an inline return from the BABA shares relative to the market in the next few months. In addition, Alibaba Group Holding Limited has a VGM Score of A (this is a weighted average of the individual Style Scores which allow you to focus on the stocks that best fit your personal trading style). Valuation metrics show that Alibaba Group Holding Limited may be undervalued. Its Value Score of A indicates it would be a good pick for value investors. The financial health and growth prospects of BABA, demonstrate its potential to outperform the market. It currently has a Growth Score of A. Recent price changes and earnings estimate revisions indicate this would be a good stock for momentum investors with a Momentum Score of A. 041b061a72