Alibaba (BABA), free money?
Alibaba stock has been on a sharp downtrend since November even as the former China leader continues to deliver strong earnings and sales growth. Increased regulatory scrutiny has weighed on Alibaba stock in recent months and the stock has fallen almost than 50% off its high. BABA stock looks like it’s on sale now, but is Alibaba stock a buy now?
China stocks sold off hard on July 23 after Beijing cracked down on education stocks like TAL Education (TAL) and New Oriental Education (EDU) fell more than 50%.
Alibaba on Aug. 3 reported a 22% rise in quarterly profit. Revenue increased 44% to $31.9 billion. Alibaba said it had 1.18 billion annual active customers during the 12 months that ended June 30, up 45 million from the previous quarter. It reported 939 million mobile active users, up 14 million. The company also increased its share buyback program by $5 billion to $15 billion.
Cloud computing revenue increased 29% to $2.49 billion.
Alibaba gapped down on May 13 after the company missed expectations, but revenue growth accelerated for the fourth straight quarter, soaring 77% to $28.6 billion.
Alibaba’s Q3 earnings report in February revealed another quarter of strong bottom-line and top-line growth.
Adjusted earnings rose 30% to $3.38 a share. Revenue growth accelerated for the third straight quarter, jumping 46% to $33.87 billion. Revenue for the company’s cloud computing business grew 50% year over year to $2.47 billion.
One day after its earnings report, Alibaba stock jumped 3.5% on Feb. 3 after the company’s fintech arm, Ant Group, struck a deal with Chinese regulators to restructure and become a financial holding company. Ant Group operates a suite of financial products, including the widely used Alipay digital wallet in China.
Sellers Hit BABA Stock
Sellers knocked Alibaba stock lower on Nov. 3 after the $34.5 billion Ant Group IPO, the fintech arm of Alibaba, was suspended in Shanghai and Hong Kong. The decision to suspend the IPO came after Shanghai exchange officials said the exchange would halt the listing due to the company’s inability to fulfill conditions amid changes in the regulatory environment.
BABA stock crashed another 8% on Nov. 10 after Chinese regulators announced new draft antimonopoly rules for China online platforms like Alibaba and JD.com (JD), among others.
Alibaba Stock Fundamental Analysis
It’s hard to find a company with a more impressive track record of growth than Alibaba. The company has a five-year annualized earnings growth rate of 29%.
Expectations were high for Alibaba’s Singles Day annual shopping event in November, China’s biggest shopping day. The company didn’t disappoint as sales nearly doubled from the year-ago period to $74 billion.
The company has been able to stay in growth mode despite a slowdown in its core e-commerce business.
Alibaba’s business in China looks a lot like Amazon’s in the U.S. Alibaba’s cloud-computing business is showing solid growth, just like Amazon’s booming web services business.
For its current fiscal year 2022, Alibaba is expected to earn $9.58 a share, down 4% compared to 2021. But growth is expected to ramp higher in 2023, up 23% to $11.79.
Alibaba keeps having an astonishing growth while the price declined from the previous high. Regulation will weigh on future performance but long-term growth will remain and the current price looks like a bargain.
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August 21, 2021 at 02:21PM