We analyzed Pepsico last week for its historical low valuation - but also its slowling growth. Today, we will analyze Alibaba, the Chinese e-commerce leader. Why? Because its valuation is just too low to ignore and the anticipated increase in news flow with Trump's return to the White House.
This is Stock of the Week, where I analyze a stock each week, covering its key metrics, recent news, my perspective on the company, technical analysis, and the opportunities it offers.
Let me know what you think of Alibaba in the comment? Opportunity or too risky?
One-Pager
The stock at a glance!
Recent news
Alibaba is advancing in the tech sector, particularly with AI. They have launched or announced several initiatives (AI-powered translation tool, multimodal pre-training dataset from instructional videos, etc). This creates synergies with their Cloud activity
Alibaba has faced intense scrutiny from Chinese regulators. This underscores the primary risk for investors: as a Chinese company, it remains vulnerable to government intervention, including the potential for regulatory control or even expropriation
The return of Trump to the White House poses a significant risk of reigniting trade tensions. Alibaba's international division could face challenges from increased tariffs. Meanwhile, its technology divisions rely heavily on U.S. technology, and losing access could set them back by several years
Last earnings report
The good dynamism of Alibaba International Digital Commerce Group is very interesting. Internal demand in China is particularly weak and is reflected with the 1% YoY growth of Taobao and Tmall.
Analysts’ recommendations
Oct, 07. Macquerie. Hold —> Buy. $145
Oct, 10. Morgan Stanley. Hold. $90 —> $115
Nov, 19. Nomura. Buy. $135 —> $130
My analysis
Despite slowing growth, the stock has the potential to deliver over 15% annual returns from its current levels, even under a conservative approach. In 2024 alone, the company repurchased 9% of its outstanding shares, and its substantial cash reserves and strong free cash flow generation provide room for additional buybacks
Alibaba’s diversified revenue streams offer significant advantages, providing a degree of defensiveness and creating interesting synergies across its business lines
That said, there are two primary risks to consider: the trade war and the Chinese government. The trade war makes Alibaba a contrarian investment. With widespread negativity surrounding the stock, even modest positive developments could act as powerful catalysts
However, the larger concern is the Chinese government. If you are uncomfortable with the potential for government intervention, Alibaba might not be the right investment for you. Whether or not you take that risk, it is important to view Alibaba as a short to medium-term opportunity rather than a long-term buy-and-hold investment
Technical analysis
I have defined three buying zones that I find interesting for long-term investments during pullbacks. While these zones may not be reached, I am prepared for a market (or stock) consolidation to seize long-term opportunities. For me, this approach offers a better risk/reward ratio.
Of course, this is just my opinion, and I am sharing it with you, but each investor should decide on their own investment style. With that said, here are my three buying zones for Alibaba.
Buying zone 1. $81
Buying zone 2. $72
Buying zone 3. $60
We are close to a buying zone, making this a potential opportunity to consider purchasing the stock if you are interested.
If you enjoyed this article and like Quality Stocks, please give it a like and spread the word!
Suggest the next stock to analyze in “Stock of the Week”
Used source: Marketscreener.com. Affiliate link just here
the recent uprising price is driven by Deep Seek AI narrative.
Telix Pharma! Lots of developments going on there