China’s economic recovery is expected to be a slow and challenging process after a difficult year. However, for investors who believe in China’s potential improvement, Alibaba stock presents an opportunity worth considering. Despite the macroeconomic conditions, the company has demonstrated impressive financial performance.
While Alibaba is known for its popular e-commerce platform, it has a larger presence in China’s technology sector. It has divisions in cloud computing and work communication, such as DingTalk, which may potentially be separated or taken public through an IPO.
The performance of Alibaba stock in 2023 has been relatively stagnant compared to its U.S. counterparts. This is likely due to concerns about China’s economy as a whole, rather than specific issues with Alibaba. Nevertheless, Alibaba has delivered solid financial results despite the ongoing challenges.
In the quarter ending in June, Alibaba exceeded Wall Street expectations by reporting earnings of $2.40 per share, compared to the expected $2.02. The company’s revenue grew by 14% year-over-year, while income from operations increased by 70% and net cash provided by operating activities increased by 34%.
These positive indicators have led some analysts to take a more bullish stance on Alibaba stock. For example, HSBC analyst Charlene Liu raised the firm’s price target from $131 to $142, and Truist analysts increased their price target from $130 to $135.
However, it should be noted that Alibaba’s success is closely tied to China’s economic situation. The country is still recovering from the impact of COVID-19 lockdowns, and supply-chain constraints continue to affect the economy.
Nonetheless, there are signs of optimism. Chinese Premier Li Qiang has announced plans for pro-business policy changes and a focus on expanding domestic demand. If followed through with action, this could provide favorable conditions for Alibaba’s growth.
According to analysts on TipRanks, BABA stock is currently rated as a Strong Buy, with an average price target of $141.19, implying a 55.75% upside potential. The most accurate analyst for BABA stock, based on a one-year timeframe, is Rob Sanderson of Loop Capital Markets.
In conclusion, while predicting China’s near-term economic recovery is challenging, Alibaba has shown resilience and strong financial performance. If you believe in the potential of China’s recovery, Alibaba stock is worth considering as a long-term investment.
