Stock (Symbol) |
Alibaba (BABA) |
Stock Price |
$102 |
Sector |
| Retail & Travel |
Data is as of |
| February 13, 2017 |
Expected to Report |
| May 3 – 8 |
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) almost broke out last week, but failed at the end of the day. So now the question is does BABA have the juice to make a meaningful move higher or will the next move be down? Alibaba is expected to grow revenue from $100 billion last year to $150 billion this year — and profits are expected to jump 36%. But honestly, the company just whipped profit estimates thus profits could come in better than expected (but you can’t bet on it as the company has missed at times in its history). BABA’s two main e-commerce sites are Tmall, China’s biggest business to consumer site, and Taobao, a consumer-to-consumer site like eBay. It also owns Youku Tudou, China’s YouTube. Not only is Alibaba growing its core online sales (+45% last qtr) it’s killing it with cloud computing (+115%) and digital media (+273%). The only negative I see is a slowing Chinese economy, but things could turn up as Europe’s economy is doing well this year and BABA has growth opportunity overseas. Alibaba has grown profits 38% and 32% the last 2 qtrs yet has a P/E of just 24. I feel this juggernaut is deserving of a 30 P/E and my 2017 Fair Value is $129 a share, with 2018’s being $164. So although the stock wasn’t able to successfully break out last week, I still feel the next significant move for BABA is up. |
One Year Chart |
 Alibaba had sales growth of 54% last qtr. Yes fifty-four percent. Profits rose 32% last qtr and blew away the 13% estimate. 2017 profit estimates increased from $3.26 to $3.49 but we can’t get too excited about this because estimates were reduced in two of the three previous qtrs. Qtrly profit estimates rose and now stand at 54%, 23%, 25% and 20%. With a Est. LTG of 28% and a P/E of 24 this stock is undervalued. |
Fair Value |
 My Fair Value on Alibaba is 30x earnings, but a case could be made the stock could be worth more. But let’s see if the stock can get towards my 2017 Fair Value of $129 before I get too excited. The stock market has been on roll since November and I feel it needs a breather. A recent failure of leading stocks to break out to new highs is another indication that the recent run could be done. |
Bottom Line |
 Alibaba’s hasn’t been a great stock since it went public, but that could change this year as sales and profits are expected to rise rapidly. I honestly am in awe that BABA could have 50% sales growth this year, and I feel that statistic is being overlooked on Wall Street. That’s a good thing as this stock is really under the radar (as crazy as it sounds). With solid fundamentals and a reasonable P/E ratio, I feel the next move for this stock will be up. BABA ranks 6th of 32 stocks in the Growth Portfolio and Aggressive Growth Portfolio Power Rankings. |
Power Rankings |
Growth Stock Portfolio
6 of 32Aggressive Growth Portfolio 6 of 16Conservative Stock Portfolio N/A |
