The Alibaba stock price has been following a downward trend over the past months despite reporting strong sales and earnings. A lot of investors are wondering if it’s a good stock to buy?
Hi, I’m Antoaneta, today I’ll share with you the Alibaba stocks. Please bear in mind that she’s not a financial expert. Everything I’m discussing with you today is Antoaneta’s opinion and not financial advice. Please hit the like button and I hope you guys like this blog. Check out my other blogs such as, “Top Stock Pick For September Why Invest In AMD?“.
You’re probably wondering what this blog is all about. If you’ve been following the stock market, you’ll see that a lot of popular companies have seen their stocks crash. And when prices are down, a lot of investors scramble to buy.
Now, is Alibaba stock a good buy? Is it worth the investment?
Alibaba is one of China’s largest companies, and it’s comparable to Amazon in the United States. Given that online shopping isn’t going anywhere, it’s safe to say that Alibaba will continue to grow over the years.
The company comprises different divisions, which are performing really well, growing massively, and delivering significant profits. The fundamentals of their business are great. But things are different with their stock price. Here’s a brief breakdown of Alibaba’s numbers.
- 52-week range = $152 to $319
- Current stock price = $162
- Global AAC = 1.18 Billion (900M China + 265M International)
- Revenue growth = 34%
- Adjusted EBITDA = -5%
- Net income = -8%
- Free cash flow = -43%
- Cloud – 29% growth
- Current P.E. – 19
- Forward P.E. = 17
The company saw its stock drop by 19% in a month and then by 24% in three months. That’s why many investors are wondering if this is a good stock to buy.
In the 52-week range, Alibaba’s stock price is from $152 to $319. The stock is sitting at $162 per share. Now let’s not forget that the S&P 500, Nasdaq, and Dow Jones are all near all-time highs. Big Tech is soaring, too. But Alibaba, which is worth $400 billion, its stock price is nearing its 52-week low.
What’s going on with Alibaba? It’s a well-established company that has so many profitable businesses that are faring well locally and internationally. But why is its stock getting hammered?
A lot of analysts say that Alibaba is a good buy, some say hold while a few ones say sell. If you consider all the figures presented above plus the recommendation of over 40 analysts, many will be convinced to buy the stocks.
In the U.S., Amazon Web Services (AWS) became a cash flow machine. Some thought that Alibaba’s cloud business will be the same. Given the massive opportunity in Asia, some thought it would be like AWS in China. Its cloud service posted a growth of 19% and its adjusted EBITA went from negative to positive.
If you look at all these figures, it’s easy to see why they’d say you should buy this stock. But there are three things that make this stock less inviting.
Negative Sentiment Towards China
The first one is the U.S. government. There have been speculations that the government will delist Chinese stocks, because of the growing negative sentiment between the U.S. and China, which started with the Trump administration. Even when Biden took over, the negative sentiment still remained like delisting Chinese companies and taking them off the exchange.
China Is Unhappy with Big Tech
China seems to be unhappy with Big Tech including Alibaba. You’ve probably watched the news about the issues between Alibaba and the Chinese government. Some may argue that something similar happens in the U.S. too. Some politicians don’t like certain companies. But there’s a glaring difference.
There may be some politicians who don’t like Big Tech companies but it’s highly unlikely that they’ll make a difference. But in China, the government is extremely powerful and will do whatever it likes even if that means going against a big tech company. Now, you just can’t imagine the U.S. doing that to Amazon. There’s just no way for that to happen in the United States but it’s a whole different story in China.
Buying A Shell Company
If you buy Alibaba stocks, don’t expect to own anything because it’s a shell company that doesn’t have any assets. Alibaba has a distinct ownership share structure compared to any American stock. You’re not guaranteed to get anything if the U.S. decides to delist the company.
If you check the figures, Alibaba is a massive company that will just continue to grow. It’s easy to say it’s the stock to buy if you only focus on the numbers. But if you factor in the three major concerns – possibly getting delisted in the US exchange, China’s disapproval of Big Tech, and Alibaba’s share ownership structure, then it’s not worth the investment.
To be honest with you, I bought Alibaba stocks a few years back and I was happy. I sold my shares and bought them again but I’m not planning to add to them anymore. I don’t feel secure with the Chinese government. It’s not the kind of stock that I feel confident about.
For now, I’m looking at Indian companies and consider them as an up-and-coming market. However, I still don’t feel secure and confident yet. So, I’m sticking with Europe, UK, and the US. I am observing the marketing movements and have no plans of investing more in any Chinese company.
Once again, I am not a financial or investment expert and this is only my opinion. By the way, we have other blogs about stocks and investing. So, don’t forget to check them out. I hope you enjoyed our discussion regarding Alibaba stock today. Hit the subscribe and the like button, and share this blog with others. That’s it for now, see you soon.
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