Is it Time to Buy the Dip on Alibaba Stock?

BABA has dropped 26% in 2021 alone

Aug 26, 2021 at 10:16 AM
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Alibaba Group Holding Limited (NYSE:BABA) is a Chinese multinational technology company that specializes in e-commerce, retail, internet, and technology. BABA provides consumer-to-consumer, business-to-consumer, and business-to-business sales services via web portals, as well as electronic payment services, shopping search engines and cloud computing services. Alibaba also owns and operates a diverse portfolio of companies around the world in numerous business sectors. This morning, BABA was last seen trading down 1% at $167.44.

Alibaba stock has decreased in price by about 40% year-over-year, but has backpedaled 47% since hitting its all-time high of $319.32 last October. Additionally, shares of BABA have decreased 26% year-to-date and are up just 11% from last week's two-year low of $152.80. Long-term pressure has stemmed from the overhead 80-day moving average.

BABAwith80MA

On the earnings front, Alibaba has beat earnings expectations on three of its last four quarterly earnings reports. For Q3 of 2020, BABA beat analyst estimates by a margin of $0.15, reporting an EPS of $2.21. For Q4 of 2020, Alibaba beat expectations by a margin of $0.60, reporting an increased EPS of $2.78. For Q1 of 2021, BABA outperformed estimates by a margin of $0.17, reporting another increase in EPS up to $3.35 For Q2 of 2021, in the most recent quarterly report, Alibaba reported an EPS of $1.59 and missed expectations by a margin of $0.13. Meanwhile, Wall Street is expecting to see massive earnings growth from Alibaba with an estimate of $14.43 EPS for its third quarter.

From a fundamental point of view, BABA has displayed incredible growth for many years now, increasing revenue. In addition, Alibaba stock’s bearish run over the past year has provided a great opportunity for investors to buy BABA at great valuation.

At a market cap of $458 billion, investors will have a hard time finding another company of a similar size with such a low price-earnings ratio like 20.43. Alibaba stock also has a forward price-earnings ratio of 17.70, further proving it to be a bargain. Overall, BABA has potential for value and growth investors alike, considering the Alibaba's business model, growth rate, current sales volume, and potential to continue rapid expansion.

 

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