Nasdaq BABA Alibaba

Last year was a very tough one for Chinese equities, with the Chinese government’s crackdown on Big Data intimidating international investors.

Starting from the ban on for-profit tutoring, which resulted in shares of New Oriental Education (EDU) and TAL Education Group (TAL) losing more than 90% of the value they had in their past highs, to the various fines the government imposed on Alibaba (BABA), it's not a mystery why China-based stocks suffered in 2021.

Alibaba, more specifically, lost nearly half its market cap year-over-year. However, the interesting part of its investment case is that during this time, its financials continued to grow, leading to the stock currently trading at a steep discount.

On the one hand, I can see why the ongoing risks attached to Chinese equities, including lack of clear communication with shareholders, nonnative corporate governance culture, and the VIE structure, amongst others, can deter investors from allocating capital to the stock.

On the other, BABA stock has become increasingly cheaper, and the situation has become increasingly harder to ignore. I believe that Alibaba's growing financials in the company's upcoming earnings through 2022 will be a strong driver in a potential valuation multiple expansion. For this reason, I am bullish on the stock.

Growing Financials

While risks with Alibaba's investment case exist, the company has been growing rapidly with little to no signs of slowing down. The company’s most recent results apparently affirmed Alibaba’s resilience, despite the rough environment surrounding Chinese equities.

Revenues grew 29% to $31.1 billion, with Alibaba’s worldwide Ecosystem reaching about 1.24 billion annual active consumers. This implies 62 million net user adds compared to the prior quarter.

EPS per ADS came in at $1.74, 38% lower year-over-year, but this was only due to Alibaba's increased investments in key strategic areas, which should result in robust ROE over time, as has been the case historically for the company.

If Alibaba were to soften its CAPEX investments, the company's net margins could very well surpass 30%. Even the highest-margin American tech companies would be envious of such margins.

The Stock is Getting Cheaper

Based on Alibaba’s FY2022 estimated EPS of $8.56, the stock is trading at a (forward) P/E of around 13.9. With analysts expecting a very reasonable EPS growth of 14% next year (which even suggests a slowdown in terms of revenue growth), shares will be trading with a forward P/E of around 2.2 next year if the stock keeps hovering at its current price.

The stock’s performance continues to mismatch Alibaba’s growth and profitability prospects. There will have to be a point at which BABA stock hits its bottom, and considering the constant share decline and widening undervaluation, it shouldn't be far from here.

Alibaba’s management is actively taking advantage of this issue by repurchasing shares on the cheap. Last quarter, it repurchased around $5.1 billion worth of stock, which implies an annualized rate equal to 1.6% of the company's market cap.

Not a massive "buyback yield," but certainly another driver to help drive the stock higher moving forward, especially if the rate of buybacks accelerates.

Wall Street’s Take

Turning to Wall Street, Alibaba has a Strong Buy consensus rating, based on the 19 Buys and three Holds assigned in the past three months. At $203.20, Alibaba's stock forecast implies 71.3% upside.

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Disclosure: On the date of publication, Nikolaos Sismanis had a beneficial long position in the shares of Alibaba through stock ownership.

Disclaimer: The information contained in this article represents the views and opinion of the writer only, and not the views or opinion of TipRanks or its affiliates  Read full disclaimer >

Alibaba (NYSE:BABA) shareholders are sitting on hefty losses. It’s worth noting that Alibaba stock lost a substantial amount of value and is trading at a multi-year low. To be precise, Alibaba stock declined 50.2% last year, underperforming the market averages by a significant margin. 

What’s Ahead?

Due to the significant drop in its share price, Alibaba stock is “cheap,” as noted by CLSA analyst Elinor Leung. However, hedge funds and investors aren’t buying this dip. 

TipRanks’ Hedge Fund Trading Activity tool shows that hedge funds have a negative view of Alibaba stock. They sold 1.1 million BABA shares in the last three months.

Furthermore, TipRanks’ Stock Investors tool shows that about 5.1% of investors holding portfolios on TipRanks have decreased their exposure to Alibaba stock in the last 30 days. Moreover, 0.6% of these investors reduced their stake in the last seven days. 

Notably, regulatory pressure on Chinese tech giants and uncertainty have kept investors at bay. Meanwhile, macroeconomic headwinds could continue to hurt Alibaba’s prospects. During the last quarter’s conference call, management stated that China’s GDP and consumption are growing, but at a slower pace. The slowdown in growth will likely hurt Alibaba’s retail sales. 

Besides macro concerns, heightened competitive activity remains a drag. Alibaba’s commerce business is facing increased competition, which is taking a toll on its overall revenue. 

Taking stock of increased competition and weakness in the macro environment, Alibaba lowered its full-year sales growth forecast. Furthermore, Daiwa analyst John Choi cut his price target on Alibaba stock, citing intensifying competition. 

Nevertheless, Alibaba’s management remains upbeat about its long-term prospects despite the near-term weakness in the domestic market. Alibaba continues to invest in its growth engines, including its cloud business and international expansion. 

Alibaba CFO, Maggie Wu, stated that the company would benefit from the growth opportunities in its cloud business amid “digitization in the industrial internet era.”

Wu added that Alibaba’s strong balance sheet and profitability position it well to “expand into new addressable markets, for the long term.”

Wall Street’s Take

The sharp pullback in Alibaba stock and the strength in the cloud business has kept most analysts bullish on Alibaba stock. On TipRanks, Alibaba has received 20 Buys and 3 Holds for a Strong Buy consensus rating. 

Further, BABA's stock forecast on TipRanks shows solid upside potential due to the recent selling. The average Alibaba price target of $203.05 indicates 70.9% upside potential to current levels.

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Disclosure: On the date of publication, Amit Singh had no position in any of the companies discussed in this article.

Disclaimer: The information contained in this article represents the views and opinion of the writer only, and not the views or opinion of TipRanks or its affiliates  Read full disclaimer >

Alibaba (NYSE: BABA) is often called the "Amazon (NASDAQ: AMZN) of China" because it's the country's largest e-commerce and cloud company.

Weibo (NASDAQ: WB), a Chinese social media company that is frequently compared to Twitter (NYSE: TWTR), might seem like an undervalued growth stock. Its microblogging platform served 573 million monthly active users (MAUs) last quarter, up 12% from a year ago, while its revenue r

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Alibaba's (NYSE: BABA) Freshippo, the grocery retail chain, is likely to add three new membership stores in January 2022, according to a report on Benzinga. 

China Daily reported on Thursday that including the new stores, the tally will reach seven stores since initiation of the membership-only warehouse chain in October 2020. 

Details 

Tagged Freshippo Business Group-X Wholesale Store (X store), the new stores are planned to open in Shanghai, Suzhou, and Nanjing in the neighboring Jiangsu province. Notably, Alibaba also added one store in early December in Shanghai. 

According to Freshippo, each store will have approximately 3,000 stock units for retail. More than 40% of products in the membership-only X store are the company's exclusive products. 

Additionally, the X store delivers products within half a day to customers living within a 20-kilometer radius of the store. The products purchased in other Freshippo stores are delivered to customers within a three-kilometer radius of another store, with a minimum delivery time of 30 minutes. 

VP of Freshippo, Zhao Jiayu, said, "We emphasize sourcing locally, which not only satisfies the needs of Chinese customers but also helps merchants and even peasants in remote areas from the supply side.” 

Official Comments 

Jason Yu, GM of consultancy Kantar Worldpanel in China, said, "The competitive edge of Freshippo's X Whole Store is still embedded in its bespoke sets of solutions to meet local customer needs－represented by the half-day delivery and its sourcing strategy－while keeping customer sentiment as a marketplace that offers 'good value for money.” 

Wall Street’s Take 

Recently, Daiwa analyst John Choi reiterated a Buy rating on Alibaba but lowered the price target to $170 (43% upside potential) from $195. 

Consensus among analysts is a Strong Buy based on 20 Buys versus three Holds. The average Alibaba stock forecast of $203.05 implies 70.8% upside potential from current levels.

Website Traffic 

TipRanks’ Website Traffic Tool, which uses data from SEMrush Holdings, the world’s biggest website usage monitoring service, offers insight into Alibaba’s performance this quarter.  

According to the tool, the Alibaba website recorded a 10.13% decrease in global visits in November compared to the same period last year. Also, a quarter-to-date comparison showed a decline of 3.76% compared to Q3 2021, while year-to-date website traffic growth stands at 1.67%.

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Chinese tech giant Alibaba Group Holding Ltd. (BABA) is considering selling its 30% stake in the social media company Weibo Corp. (WB), as per Bloomberg. Following the news, shares of BABA fell 2.4%, closing at $112.09, while WB shares slipped 3.5% and closed at $28.52 on December 29.

Alibaba In Talks with Shanghai Media Group

According to the report, Alibaba is in preliminary talks with the state-owned conglomerate Shanghai Media Group (SMG) to sell all of its 30% stake in Weibo.

Amid regulatory overhauls and increased scrutiny by the Chinese government, tech companies are finding ways to avoid attracting more attention. BABA’s step to offload its stake follows the news of Tencent Holdings Ltd's. (TCEHY) recent sell-off of its stake in tech company JD.com Inc. (JD).

The Chinese government is worried about the influence these media companies have on people and does not want any single company having a majority hold in any of the technology segments.

Since SMG is a state-owned company, it stands higher chances of getting Beijing's approval compared to any private acquirer. SMG also has a majority stake in Oriental Pearl Group Co. which has television stations, online portals along with a 20% stake in the Shanghai Disney Resort.

Weibo being an open platform for people to share their opinions and express their views, comes directly under the government’s radar. Shedding its stake from Weibo is in line with the government's directives to shed some of its stake from social media companies, as reported in March.

Consensus View

Recently, Daiwa analyst John Choi lowered the price target on BABA stock to $170 (51.7% upside potential) from $195, while maintaining a Buy rating.

Choi believes the increased competition in the e-commerce market is a big risk for BABA in both its home market and abroad. BABA earnings for the third quarter of fiscal year 2021 are scheduled for February 2, 2022.

Overall, the stock commands a Strong Buy consensus rating based on 20 Buys and 3 Holds. The average Alibaba price target of $203.05 implies 81.2% upside potential to current levels. Shares have lost 53% over the past year.

Website Traffic

TipRanks’ Website Traffic tool, which uses data from SEMrush Holdings (SEMR), the world’s biggest website usage monitoring service, offers insight into BABA’s performance.

In November, Alibaba website traffic recorded a 10.13% year-over-year decline in monthly visits. However, year-to-date website traffic growth increased by 1.67% compared to the same period last year.

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Alibaba (NYSE: BABA), one of the bellwethers of China's tech sector, lost roughly 50% of its market value over the past year as Chinese antitrust regulators probed and fined its e-commerce business. The regulators also imposed new restrictions on Alibaba's exclusive partnerships

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The China Securities Regulatory Commission (CSRC) said last Friday https://www.reuters.com/markets/europe/china-securities-regulator-says-vie-compliant-companies-can-list-overseas-2021-12-24 that companies operating with a so-called variable interest entity (VIE) structure seeking to list abroad will need approval from the watchdog before the deal goes ahead.

Despite its muted forecast for full-year earnings, I am bullish on Chinese e-commerce giant Alibaba (BABA). Warren Buffett famously said, "Be fearful when others are greedy and be greedy when others are fearful." The adage is true for several stocks out there. But Alibaba is perhaps the greatest example in the market right now.

The e-commerce giant is not having the best time as of late. Regulators in Beijing are sharpening their knives, and many large conglomerates are feeling the pinch. Alibaba is no different. Chinese regulators fined the company $2.8 billion for abusing its market dominance. It is important to note that the fine amounts to about 4% of its 2019 domestic revenue.

The slowdown of the Chinese economy is also weighing down sentiment. The company forecast that its annual revenue growth will slow down to a crawl this year, the worst since its listing in 2014.

Hence, BABA stock is taking a pasting these days. However, the fact that shares are trading at rock bottom prices right now means that there is the potential for opportunity. Alibaba is still head and shoulders above the other e-commerce companies active in its region.

Often referred to as the "Amazon of China," operating metrics are generally rock solid. For those looking for a solid tech stock during the holiday season, look no further than BABA.

China's Growth Forecast Is Impacting Alibaba Stock

China's slowing economy has impacted consumption. There are multiple reasons why this is happening. First, China is employing a zero-COVID strategy. Although many countries in Asia have decided to live with the virus, China persists in this rigorous approach. The preparedness process includes strict lockdowns, even after just one or handfuls of cases have been detected. Naturally, it leads to a slowdown in the economy.

Additionally, the energy crisis in China is just one example of how the world's supply can be disrupted by high costs for coal and inflexible electricity prices. Due to the energy shortages, local governments enforce rolling blackouts, which primarily affect industries like steelmaking or manufacturing chemicals.

Finally, Evergrande, one of China's largest property developers, and its debt burden is still big news. Beijing is trying to deleverage the sector and pacify fears. However, panic has spread to other Chinese companies as they also halt or delay payments.

These factors are combined to create a tailspin for the Chinese economy. It grew at just 4.9% in Q3, a steep drop sequentially from the 7.9% expansion in the second quarter. Hence, Chinese companies are feeling the pinch due to a strained economic forecast, and Alibaba stock is no exception.

Quarterly Results Underscore Larger Issues

Over the years, Alibaba has cultivated a reputation as a solid performer. However, its recent quarterly earnings represent a rare misstep. The e-commerce juggernaut posted Q2 revenue of 200.69 billion yuan ($31.4 billion), representing year-over-year growth of 29%. EPS came in at 11.20 yuan, a 38% dip from the year-ago period. Both revenue and EPS figures missed estimates.

Customer Management Revenue, or CMR, is the company's bread and butter. That segment, in particular, is struggling. Revenues from this area rose just 3% from the year-ago period.

A bright spot, though, is Cloud Computing. Investors are closely monitoring this area. The segment has been on a tear, jumping 33% to make up 20 billion yuan in revenue. This year's EBITA was 396 million yuan versus a 567 million yuan loss last year, proving that the company is turning things around. Moving forward, the growth of this segment will become a lynchpin of the company's overall strategy.

As highlighted in the earlier section, the Chinese economic slowdown affects BABA. However, the other major issue is Chinese regulatory concern. The Chinese government is clamping down on the domestic technology industry. Antitrust and data protection are taking center stage.

For years, Chinese tech giants grew unabated. However, Beijing now wants to regulate the behavior of the domestic technology industry. The fine of $2.8 billion in April becomes understandable in this context.

Looking ahead, BABA cut its revenue guidance for Fiscal Year 2022. Previously, the company had forecast 930 billion yuan, a year-over-year jump of 29.5%. However, now it expects much more conservative revenue growth within the range of 20% to 23%.

Management Shuffle

In light of slowing performance, Alibaba is looking to shake things up. Hence, longtime finance chief Maggie Wu is stepping down from her position. Deputy CFO Toby Xu will be the main CFO starting in April 2022.

In a press release, Wu cited her retirement as the "culmination of extensive preparation over many years" and said it would allow new blood injection into the management circle.

Alibaba is creating two new divisions — International Digital Commerce and China Digital Commerce. The change is aimed to reverse slowing growth and create a clearer path to growth and value creation. The international business division will manage the company's operations in Europe, South America, and Southeast Asia, among other places.

Alibaba has tapped 36-year old executive Jiang Fan to lead its overseas division. Meanwhile, Trudy Dai will take care of the domestic e-commerce business operations. Jiang led Taobao's push into mobile and was seen as a contender to take the reins of Alibaba Group until he became embroiled in a personal scandal last year.

AMZN Forecast Versus Alibaba

The two biggest companies in e-commerce are Amazon (AMZN) and Alibaba. The fight for global leadership has been a long one. The two companies have been going head-to-head as they both strive to become the world's leading online retailers.

Amazon launched in 1995, whereas Alibaba started up less than five years later. The former has taken over American retail, while Alibaba rules China's e-commerce market.

However, the business models of Amazon and Alibaba couldn't be more different, with the former being an e-commerce company while the latter is operating as either a retail site or auction house.

You cannot go wrong investing in either one. But at the moment, Alibaba is the better stock. The AMZN forecast doesn't call for much upside. In comparison, due to the issues BABA faces domestically, this one is trading at a huge discount.

Wall Street's Take

The sentiment for Alibaba on Wall Street is turning bullish. The stock has a Strong Buy consensus rating, based on 20 Buys and three Holds assigned in the past three months. The average Alibaba stock forecast of $203.05 implies 76.9% upside potential.

Alibaba Stock Forecast Implies Huge Upside Potential

Understandably, BABA has seen better times. Alibaba is still investing heavily in new business lines as its core e-commerce business peaks and profitability slows.

If things stabilize next year, then BABA stockholders will be laughing all the way to the bank. According to Goldman Sachs, the Alibaba Group is the largest e-commerce player in China, with an estimated 69% market share for 2020.

Considering its history and size, Alibaba is a value play at the moment. Much of what is happening with the company has nothing to do with its operations. Instead, you can chalk most of that up to the intense regulatory environment in China. Nevertheless, the Alibaba stock forecast is solid. The fact that shares are available at a discount is more than enough reason to consider it.

Disclosure: At the time of publication, Faizan Farooque did not have a position in any securities mentioned in this article.

​Disclaimer: The information contained in this article represents the views and opinion of the writer only, and not the views or opinion of TipRanks or its affiliates.  Read full disclaimer >

Today, December 28, 2021, among the underlying components of the NYSE American, we saw unusual or noteworthy options trading volume and activity in Senseonics Holdings, Inc. (SENS), which opened at $2.83.

Some of the major indexes might be near all-time highs, but many highly valued and high-growth stocks have fallen substantially over the past six months. With the majority of these stocks, nothing is wrong with them, and that leaves an optimal opportunity to buy some beaten-down