Stock (Symbol) |
Alibaba (BABA) |
Stock Price |
$77 |
Sector |
| Retail & Travel |
Data is as of |
| May 16, 2016 |
Expected to Report |
| Aug 12 – Aug 13 |
Company Description |
 BABA is a holding company. The Company is principally engaged in online and mobile commerce through products, services and technology. The Company provides retail and wholesale marketplaces available through both personal computer and mobile interfaces in the PRC and internationally. Retail marketplaces and services operated by the Company include the China online shopping destination (Taobao Marketplace); the China brands and retail platform (Tmall); the China group buying site that offers products by aggregating demand from consumers through limited time discounted sales (Juhuasuan), and the global consumer marketplace targeting consumers around the world (AliExpress). Wholesale marketplaces operated by the Company include the online China wholesale marketplace (1688.com) and the online business-to-business marketplace that focuses on global trade among businesses from around the world. Source: Thomson Financial |
Sharek’s Take |
 Alibaba (BABA) is looking good, so good I almost purchased it yesterday when it broke out past $80. As you see in the one-year chart the $80 price was resistance and when BABA broke about that yesterday that was a bullish sign. Although profits fell 4% last qtr, qtrly estimates called for 8%, 27%, 18% and 63% profit growth the next 4 qtrs. At 24x earnings the stock had good upside. My 2017 Fair Value is $103, which would be a 33% gain. With growth stocks showing signs of life, BABA might be a good buy right now. Except today we found out the SEC is investigating the company for its accounting practices. Baron’s recently scrutinized the company and didn’t paint a pretty picture. Chinese companies often bend the rules with their accounting, with many having two sets of books. I’m not looking that deep into BABA’s financials, I’m more of a big picture guy. Still, I would prefer more transparency in a stock I hold. With this new SEC news I will hold off on buying BABA but will keep the stock on my radar. |
One Year Chart |
 Profit growth had been good until the -4% growth put out last qtr. That was a big disappointment as analysts had expected 17% profit growth. BABA missed the $0.56 estimate by 10 cents. Afterwards, next qtr’s est got reduced from 15% growth to 8%. 2016 profit estimates also fell from $3.38 to $3.24. Lots of negatives. On the plus side the Est. LTG is a robust 26% and the P/E is 24 which is reasonable. Profit growth estimates for the next 4 qtrs are 8%, 27%, 18% and 63% (this last one is high because the company had a big miss last qtr thus year-over-year comparisons are easy). |
Fair Value |
 I think this stock is worth 25x earnings, which gives it a Fair Value of $81. 2017’s Fair Value is $103 and that’s where we can see a better return if Alibaba does make $4.12 and earns a 25 P/E. |
Bottom Line |
 Alibaba’s broke out yesterday, then made a reversal today on news the SEC is looking into the company’s accounting. I feel the SEC news will place a cloud over the stock, and will not buy into BABA at this time. The stock will remain on the radar. |
Power Rankings |
Growth Stock Portfolio
N/AAggressive Growth Portfolio N/AConservative Stock Portfolio N/A |
