Alibaba Group Holding Ltd. (NYSE: $BABA) specializes in providing technology infrastructure services in the e-commerce sector. It also has a growing footprint in cloud computing, entertainment, digital media, and other sectors. The group operates via its Chinese subsidiaries.
Earnings Report
In its recent fiscal Q2 earnings report, Alibaba Group Holding Limited reported strong numbers. The company reported revenue of S$32.29 billion, surpassing the analysts’ target of $30.74 by 4.11%. However, earnings per share came in lower than expected. In the quarter, Alibaba reported an EPS of $0.23, an 85% drop from the analysts’ estimate of $1.98.
The company reported that net cash from operating activities stood at $6.248 billion at the end of the quarter, with free cash flow at $%.391, a 76% increase compared to the same quarter in 2022.
Alibaba Group Holding Stock Performance
Alibaba Stock (BABA) is trading close to its 52-week low of $64.80. As of November 3, 2023, BABA is worth $83.41 per share. The lows are despite the stock’s undervaluation. Additionally, the company is engaged in an ongoing share buyback while announcing plans to break up the business via spinoffs.
While revenue growth has stagnated, Alibaba has managed to boost profitability. Per its last earnings report, the net profit margin stood at 14.62%, representing a 32.67% year-over-year increase.
The company has a strong balance sheet, ample net cash, and a huge equity portfolio. Together, they account for around 57% of its market cap of $212.427 billion. Despite its impressive figures, BABA stock is down 9.32% year-to-date.
Why Alibaba Stock is Underperforming
One of the reasons why investors are not warning about BABA stock is the rising geopolitical tensions between the US and China. The US has imposed sanctions on various Chinese tech firms. However, the deep value of BABA stock may eventually overcome worries by investors.
Another factor that may come into play is the sluggish recovery of the Chinese economy. Many market analysts agree that China is poised for slow growth. With it being an important source of revenue for Alibaba Group, some investors may be waiting on the sidelines to see how the Chinese economic recovery plays out.
Alibaba Group Holding Stock Forecast
While many investors ignore BABA stock’s strong earning power, stock analysts have given it a Strong Buy rating. They give the stock an average price forecast of $140.42, with a high of $187 and a low of $100. Its average price forecast is 68.35% upside from the current price.
Should You Buy Alibaba Stock?
While BABA has experienced a price recovery from its lows, it is still at the same level as in 2014, when it went public. Once considered a growth stock, investors have abandoned it. Looking at the data, institutional investors only hold 14.90% of BABA stock.
Furthermore, the top ten institutional holders only hold 4.60% of the stock. Considering all the factors above and the analysts’ consensus buy rating, holding BABA stock would be a good investment. However, when making any investment decision, always assess your risk appetite carefully.
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