Stock (Symbol) |
Alibaba (BABA) |
Stock Price |
$189 |
Sector |
| Retail & Travel |
Data is as of |
| January 11, 2018 |
Expected to Report |
| Feb 1 |
Company Description |
 BABA is a holding company. The Company is principally engaged in online and mobile commerce through products, services and technology. 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). Source: Thomson Financial |
Sharek’s Take |
 Alibaba (BABA) is growing much faster than investors are aware of. This is clearly one of the top stocks in the market with the potential to be an All-Time great. Revenue jumped 61% last qtr — that’s incredible for a company this size — with divisional year-over-year sales growth as follows:
The company’s two main e-commerce sites are Tmall, China’s biggest business to consumer site, and Taobao, a consumer-to-consumer site like eBay. BABA also owns Youku Tudou, China’s YouTube. Management even buys back stock as well, with a $6 billion stock buyback plan in place. Three qtrs ago management said 2017 revenue would grow 45-49% — well above analyst estimates of 31% growth — and I felt the stock should go materially higher on the news. Since then it’s gone from $140 to $189. But that’s not enough. Profits just exploded (+74%) and yet BABA has a P/E of just 36. The company is making so much money — cash flow was $3.4 billion just last qtr — that this train will be nearly impossible to stop. Management is spending on logistics (to dominate Asia’s retail market), cloud computing, digital entertainment and other innovation initiatives. China is doing 15% of its commerce online, that means there’s lots of opportunity to capture an even bigger chunk of the remaining 85%. With excellent fundamentals and an undervalued stock, BABA looks fantastic going into 2017. |
One Year Chart |
 Last qtr BABA was expected to report profit growth of 38% and whooped analyst estimates with 74% growth. That was the 2nd straight qtr the company crushed estimates. Sales growth accelerated from 56% to 61% last qtr. One negative this qtr is qtrly profit Estimates declined a little , and now stand at 26%, 59%, 33% and 15%. The Est. LTG of 33% is outstanding. The P/E of 36 is quite reasonable. |
Fair Value |
 Normally at this time of the year I’m looking ahead to 2018 profit estimates. But Alibaba’s fiscal year end is March 31st, so I’m still on 2017. Next qtr I’ll look ahead to 2018 — and wow there’s a lot of upside going on there. Doing some quick math…BABA sells for just 28x 2018 profit estimates. A P/E of 28? With profits zinging higher. Oh, and 2018 profit estimates have been jumping the last 4 qtrs, from $5.48 to $5.96, $6.56 and $6.75. So could the company make $8 in 2018? Hypothetically speaking, a 35 P/E on $8 in profits would be a $280 stock. This Alibaba is cheap, cheap, cheap (and I mean that in a good way). |
Bottom Line |
 Alibaba’s has its profit growth accelerate since its IPO. From 20% in 2014 to 34% last year and possible 50% in 2017. This extra cash allows management to grow its infrastructure across Asia, giving the company exceptional growth opportunity. And with a P/E of around 30 this stock has solid upside. BABA ranks 2nd in the Growth Portfolio and Aggressive Growth Portfolio Power Rankings. |
Power Rankings |
Growth Stock Portfolio
1 of 39Aggressive Growth Portfolio 1 of 16Conservative Stock Portfolio N/A |
