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.
I ditched corporate America in 1994 and started a management consulting and venture capital firm ( ). I began following stocks in 1981 when I was in grad school at MIT and first analyzed tech stocks as a guest on CNBC in 1998. I became a Forbes contributor in April 2011. My 15th book -- published in November 2020 -- is \"Goliath Strikes Back: How Traditional Retailers Are Winning Back Customers from Ecommerce Startups.\" I appeared eight times in the 2016 documentary: \"We The People: The Market Basket Effect.\" ( ). I also teach business strategy and entrepreneurship at Babson College in Wellesley, Mass. ( -Peter.aspx)
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Alibaba's (BABA -1.16%) stock is up more than 20% this year as China relaxed the zero-COVID restrictions that were throttling its economic growth. Is it too late to buy Alibaba right now, or does it still have more room to run this year?
Alibaba's stock closed at its all-time high of $317.14 on Oct. 27, 2020. At the time, many investors considered it to be a solid long-term investment because it was China's largest e-commerce and cloud platform company.
All those headwinds made Alibaba a tough stock to love. In fiscal 2021 (which ended on March 31, 2021), its revenue and adjusted earnings per share (EPS) rose 41% and 23%, respectively. But in fiscal 2022, its revenue only grew 19% as its adjusted EPS dropped 19%. For fiscal 2023, analysts expect its revenue and adjusted EPS to rise 10% and 6%, respectively.
Alibaba's high-growth days might be over, but its stock looks cheap at 12 times forward earnings. JD.com and Pinduoduo, which are both growing faster than Alibaba, trade at 20 and 22 times forward earnings, respectively.
Alibaba's stock is still trading at a discount because the regulatory headwinds haven't fully dissipated yet. Over the past few months, the Chinese government acquired "golden shares" (which have special voting and veto rights) in two of Alibaba's domestic businesses -- Youku Tudou's film and TV unit, and a research and development division called Guangzhou Lujiao. That creeping influence indicates the Chinese government still plans to tighten its grip on Alibaba's sprawling digital ecosystem.
Alibaba (BABA -1.16%) 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.
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.
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. 59ce067264