Alibaba (BABA) shares now offer a favorable balance of risk and potential reward, according to analysts. BABA stock represents a good buy opportunity following a sharp selloff that has left its shares down 70% over the past one year.
Increased regulatory scrutiny and several other unexpected events in the market have weighed down certain Chinese stocks. Alibaba (BABA) is one of these stocks that have seen a major decline in its price since the beginning of the year. But BABA stock has some solid fundamentals, and it is hard to find a company with a more impressive track record of growth.
Investors see a good buying opportunity for the stock as it is trading at a very low price. Let's see whether Alibaba stock is a good investment now.
An Overview Of Alibaba (BABA) Stock
The considerable growth of Alibaba Cloud makes BABA a tempting deal to invest in now.
The shares of the Chinese e-commerce company Alibaba have been on edge for the past few months. This is because China’s financial regulators have increasingly moved to rein in Chinese technology companies with international listings, imposing large fines and other restrictions on companies, especially Alibaba.
But thanks to its high potential, the BABA stock still seems to be a good buy now. Investors are intending to buy the dip as analysts stressed that they see ample avenues of growth in the stock for the future. The company has been growing consistently despite a slowdown in its core e-commerce business, making BABA a potential stock to invest in.
Moreover, Alibaba's business in China is almost similar to Amazon’s in the US. The company's cloud-computing business is showing firm growth, just like Amazon’s booming web service business.
Although the stock is having trouble matching with its previous growth, Alibaba’s business continues to be robust. The company also has growing segments in cloud computing and storage, digital media, and entertainment, pushing the investability quotient of BABA stock. Although these segments remain much smaller compared to its e-commerce business, they have been consistently adding to its total revenues.
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Alibaba's Growth Potential
Thanks to its strong fundamentals, BABA stock could be a good buy now for the future.
Alibaba stock indeed has highly disappointed investors with its last earnings results. But several analysts still believe that the company’s strategic investments will continue to pay dividends. Apart from that, the stock’s weak performance would not affect its solid fundamentals and future growth.
Moreover, Alibaba Cloud is garnering global prominence and industry recognition with the kickstart of the winter Olympics in Beijing in February. With the company’s logo on the boards of Olympics spread across China, plus the extensive media coverage on the event, the market would be again reminded of the e-commerce and cloud giant. This will gain significant attention from investors worldwide, pushing the demand for BABA stock to new levels.
Additionally, Alibaba Cloud is also a key cloud supplier to the Olympics and is helping to make the world's largest sporting event more inclusive. The collaboration has allowed all eligible TV broadcasters to access the cloud with lower latency and high-security measures.
Read Also: Alibaba (BABA) Stock Price Prediction
Is Alibaba Stock A Good Buy?
Analysts remain bullish on the long-term outlook of Alibaba, making this the right time to invest in BABA stock.
Alibaba has an array of plans in the pipeline. The company has already announced its plans to restructure its e-commerce operations by forming two new digital commerce divisions focused on international and domestic markets. Moreover, over the years, Alibaba has enjoyed consistent growth. The company has a five-year annualized earnings growth rate of 27%. As a result, analysts predict that if Alibaba can get anywhere near its highs for the day during the final hour of trading, it could be a sign of strong buying demand for the stock.
Additionally, Alibaba group is also enjoying a greater cloud revenue from serving an enlarged market. As the company offers superior performance at a more competitive price, customers are now increasingly moving from other cloud providers to Alibaba Cloud.
forty-seven out of 48 analysts on Yahoo Finance rate BABA a buy or strong buy. According to experts, Alibaba is a great long-term investment due to its position as a solid growth play, its rising popularity with the cloud business, its positioning as a profitable E-commerce business model, as well as its rising revenues and profits and buying back its own shares. However, a tougher regulation and more competition might hurt the company and its investors in the future.
Once the company scales up its higher-growth cloud and international commerce businesses, Alibaba’s margins could gradually stabilize over the next few quarters. Moreover, it is trading at a lower price, implying that Alibaba stock could be a good buy now. If it can maintain a double-digit percentage revenue and earnings growth for a few more years, BABA stock would position itself as a bargain at its current forward price-to-earnings multiple.
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