BABA: Why Alibaba Stock Surged 14.8% on Thursday?
Shares of China’s e-commerce
giant Alibaba Group (NYSE:
by 14.8% on May 26 after the company announced its fiscal fourth
quarter of 2022 results ended in March. In Q4, Alibaba reported
revenue of $32.1 billion with adjusted earnings per share of $1.24.
Comparatively, Wall Street forecast revenue of $29.9 billion and
adjusted earnings of $1.10 per quarter for Q4.
We can see that BABA stock surged
as it beat consensus revenue and earnings estimates comfortably.
While its sales were up 9% year over year, earnings fell by 23% in
In a press release, Alibaba’s CEO
Daniel Zhang stated the company “delivered on the goal of serving
one billion annual active consumers in China this past quarter" and
that the company achieved a record gross merchandise volume (GMV)
of $1.3 billion for the full year, despite “macro challenges" and
supply chain issues.
However, Alibaba also emphasized
that the risks and uncertainties arising due to COVID-19 meant it
can’t provide any guidance for Q1 or fiscal 2023. We have seen
China recently imposed lockdown restrictions in several cities
which has exacerbated supply chain issues but has also acted as a
tailwind for Alibaba and other e-commerce businesses.
In fiscal 2023, Alibaba aims to
focus on generating sustainable growth while optimizing its cost
structure to tide over an uncertain macro environment.
Is Alibaba stock a buy?
Alibaba is one of the best tech
stocks to buy given China’s massive population of 1.4
Over the years, Alibaba has
provided a robust platform connecting buyers and sellers in China’s
burgeoning e-commerce market.
MSFT), and Alphabet
(NASDAQ: GOOG)(NASDAQ: GOOGL), Alibaba is also eyeing the public cloud
segment and is the fourth-largest player in this vertical which
will be a key driver of sales going forward. Additionally, Alibaba
has entered into a joint venture agreement to manufacture
Alibaba depends on the widening
manufacturing capabilities of China. Several manufacturers have
temporarily closed factories due to COVID-19-related lockdowns
which reduced Alibaba’s ability to benefit from higher e-commerce
The ongoing war between Russia
and Ukraine as well as the crackdown of the Chinese government on
domestic tech companies have increased risks associated with
investing in Alibaba and other such stocks based out of
Right now, BABA stock is down 70%
from record highs and has returned a marginal 0.63% since the
company went public eight years back.
Investors are worried about
Alibaba’s slowing revenue growth. In the last four quarters,
Alibaba reported revenue of $125 billion which was an increase of
20% year over year. However, its net income has fallen in this
period due to rising expenses and impairment costs.
What next for BABA stock and investors?
Alibaba’s less than impressive
performance has meant the company is valued at $258 billion by
market cap. Despite a slowdown in sales, Alibaba is forecast to
increase sales by 11.5% year over year to $142.3 billion in fiscal
2023. Comparatively, its earnings are forecast to expand
to $7.93 per share which is in line
with its earnings in 2022.
BABA stock is valued at less than
two times forward sales and a price to earnings multiple of 11.9
which is quite reasonable.
There is a good chance for
Alibaba stock to move lower in case market sentiment remains
bearish. However, every major pullback should be viewed as an
opportunity to buy stocks at a discount. BABA stock is trading at a
discount of more than 75% compared to Wall Street average price
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