Alibaba’s Strong Comeback: What You Need to Know
Overview of Alibaba Group
Alibaba Group (BABA) holds a Zacks Rank #1 (Strong Buy) and is a major player in the Chinese e-commerce industry, operating well-known platforms such as AliExpress for international customers and Taobao for domestic shoppers. Similar to Amazon (AMZN), Alibaba’s portfolio extends beyond e-commerce to include Alibaba Cloud, which has grown into the company’s second-largest revenue source since its launch in 2009. The company also thrives in international wholesale, digital payments, and logistics sectors.
Chinese Government’s Economic Stimulus
In 2024, the Chinese government shifted its approach completely, enacting a substantial stimulus package. This included lowering interest rates and easing restrictions, with plans for further actions. The People’s Bank of China Governor Pan hinted at possible reductions in the reserve requirement ratio, along with anticipated cuts in the loan prime rate. Recent data shows a rebound in growth and robust retail sales, which supports the positive outlook for Chinese stocks like BABA, especially as the economy recovers from a low point.
Despite a 34% increase in BABA shares this year, the stock remains undervalued. Currently, Alibaba’s price-to-sales ratio stands at 1.88x, nearing historic lows and significantly lower than the all-time high of 18x reached in 2018.
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Alibaba is currently engaged in a significant share repurchase program. The company has consistently bought back shares throughout September, including over $17 million in a single purchase on October 17th. Such buybacks can be seen as a positive move, reducing the number of outstanding shares. A successful example of this is Apple (AAPL), which saw considerable stock performance improvements after implementing similar strategies following pressure from investors.
Institutional Investment in BABA
Recent 13F disclosures show that institutional investors managing over $100 million have significant stakes in BABA, including prominent investors like Michael Burry and David Tepper.
Hong Kong Listing and Stock Connect Program
With a Hong Kong listing and access through China’s Stock Connect program, BABA is now reachable for millions of potential investors. Financial institutions like Goldman Sachs (GS) and Morgan Stanley (MS) predict that this move could attract inflows of $10-$20 billion into the stock.
Market Adjustments Following the Breakout
BABA shares are currently retreating towards their 50-day moving average for the first time after an initial surge attributed to government stimulus. Although a further decline may be possible, this kind of pullback is typically seen as a buying opportunity following a significant breakout.
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Conclusion
Alibaba is recovering as China’s leading e-commerce player, aided by growth in international operations. The stock is undervalued, has increased accessibility for investors, and shows support from institutional investors.
Top Stock Pick from Zacks Research
Experts at Zacks have identified five stocks with high potential for growth over the coming months. Among these, Director of Research Sheraz Mian highlights one stock expected to see the most significant gains.
This top choice is from a cutting-edge financial firm that already serves over 50 million customers and is known for its innovative solutions. Although not every pick is guaranteed to succeed, this particular stock could exceed the performance of past winners like Nano-X Imaging, which jumped +129.6% in just nine months.
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Amazon.com, Inc. (AMZN) : Free Stock Analysis Report
The Goldman Sachs Group, Inc. (GS) : Free Stock Analysis Report
Morgan Stanley (MS) : Free Stock Analysis Report
Apple Inc. (AAPL) : Free Stock Analysis Report
Alibaba Group Holding Limited (BABA) : Free Stock Analysis Report
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