Alibaba: Upgrade To A Contrarian Buy

Seeking Alpha11-29

SummaryAlibaba's stock has dropped to $85, creating a contrarian buying opportunity due to improved macro data and better price-valuation tradeoff.China's retail sales growth surged to 4.8% in October...

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Toby_Chua
11-30
Toby_Chua
Trading delta $85 to $115 buy and sell for the last 3 years so far so good

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}\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nAlibaba: Upgrade To A Contrarian Buy\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-11-29 17:57 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4740822-alibaba-stock-upgrade-contrarian-buy><strong>Seeking Alpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>SummaryAlibaba's stock has dropped to $85, creating a contrarian buying opportunity due to improved macro data and better price-valuation tradeoff.China's retail sales growth surged to 4.8% in October...</p>\n\n<a href=\"https://seekingalpha.com/article/4740822-alibaba-stock-upgrade-contrarian-buy\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"09988","symbol_name":"阿里巴巴-W","start_time":0,"source_url":"https://seekingalpha.com/article/4740822-alibaba-stock-upgrade-contrarian-buy","article_id":"1107418003","we_media_id":null,"thumbnails":[],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=1107418003","pubTimestamp":1732874224,"sourceInfo":{"source_id":"lsy1728464409321","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"SummaryAlibaba's stock has dropped to $85, creating a contrarian buying opportunity due to improved macro data and better price-valuation tradeoff.China's retail sales growth surged to 4.8% in October","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"09988":"阿里巴巴-W","BABA":"阿里巴巴"},"translate_title":"阿里巴巴-SW：升级为逆向买入","themeId":"","isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"09988":1.1,"BABA":1.1},"content_text":"SummaryAlibaba's stock has dropped to $85, creating a contrarian buying opportunity due to improved macro data and better price-valuation tradeoff.China's retail sales growth surged to 4.8% in October, benefiting Alibaba's domestic eCommerce, despite mixed growth in other segments.Alibaba's stock is near oversold levels, making it a bargain with a leading profit multiple of 9.3x and an intrinsic value estimate of $118-$128.The risk/reward relationship has improved, justifying a moderate 'Buy' rating, contingent on Beijing's stimulus measures boosting consumer spending.The stock price of Alibaba Group Holding has fallen into a short-term down-channel which creates a buying opportunity for contrarian-minded investors, in my view.Alibaba Group Holding’s stock has consolidated down to the $85 price level which reflects a major change in sentiment compared to September which is when Beijing announced stimulus measures to prop up its economy which in turn catalyzed a parabolic surge in valuations for Chinese companies.With China’s retail spending growth surging in October, I think that BABA’s stock has sold off too much. Alibaba Group Holding reflects strong value at a present price of $85.24, and I am reopening a contrarian ‘Buy’ position for the eCommerce company due to improving macro data and a better price-valuation tradeoff.My Rating HistoryMy last stock classification for Alibaba Group Holding was ‘Sell’ because of what I perceived to be an unsustainable run in the company’s stock price in September. My opinions have also evolved in terms of a rebound in retail-driven spending in China’s economy.Though my primary investment strategy is seeking out discounted investment value, and not trading, I like to highlight an opportunity when I see one, and therefore reverse my prior ‘Sell’ stock recommendation.I have moved back into Alibaba Group Holding on Monday, particularly for valuation reasons.China Retail Sales And Portfolio GrowthAlibaba Group Holding produced 5% YoY sales growth in the last financial quarter and the eCommerce company reported total sales of RMB 236.5 billion which equates to $33.7 billion.In the prior quarter Alibaba Group Holding’s sales rose 4%, so the eCommerce company benefited from faster sales growth, thanks primarily through a boost of growth in the company’s biggest segment, Taobao and Tmall Group, though the picture here was also a differentiated one.China wholesale commerce sales surged to 6.0 billion Chinese Yuan ($853 million), reflecting 18% YoY growth, whereas Direct Sales plunged 5% YoY to 22.6 billion Chinese Yuan ($3.2 billion).Direct sales include sales from Alibaba Group Holding's major eCommerce brands including Tmall Supermarket, Tmall Global and others. International eCommerce did substantially better, with the segment profiting from a sales surge of 29% and total sales of 31.7 billion Chinese Yuan ($4.5 billion).Consolidated Revenue (Alibaba Group Holding)The difference in growth profiles for Alibaba Group Holding's eCommerce segments, domestic and international, highlights the fundamental growth problems the Chinese economy is going through. While the international eCommerce segment is booming, the growth profile in domestic eCommerce is much weaker.A bloated, leveraged property sector and a soft recovery for China’s economy after Covid have been two reasons why China’s economy has grown much more slowly than anticipated. In the third quarter, China’s GDP grew only 4.6% YoY, less than the 5% growth target laid out by the CCP.China’s retail sales are on an upswing, however, which could be a sign of things to come, particularly if Beijing’s fiscal and monetary stimulus measures bear fruit and help push China’s economy into a new accelerating growth phase. Beijing guided for a set of measures to stimulate spending and take pressure off of the financial and property sectors.On the flip side, China’s retail sales rose to 4.8% in October, up from 3.2% in the prior month.Obviously, growing spending in the retail sector would be a good development for Alibaba Group Holding as the company runs a number of Direct Sales business that would profit from consumers spending more money on food, beauty, or hardware products.China's Retail Sales (National Bureau of Statistics of China)Technical Chart AnalysisAlibaba Group Holding’s stock has suffered a precipitous decline since the start of October which is almost a perfect mirror image to the explosive rise in the stock price shortly after Beijing announced major fiscal stimulus support in order to support its flailing economic growth.With that said, Alibaba Group Holding could be a potentially promising investment opportunity for investors that want to deploy some cash here now that the eCommerce company has fallen out of favor.In November, Alibaba Group Holding crashed through the 50-day moving average trendline and presently the stock price sits just above the 200-day moving average, which could foreshadow a near-term challenge of this crucial trendline. From a sentiment point of view, holding the 200-day moving average would be preferable; otherwise, Alibaba Group Holding could see an ongoing decrease in its stock price to at least $75, which is where the eCommerce stock has built some prior support.According to the Relative Strength Index, Alibaba Group Holding's stock is close to being oversold, which could be a contrarian indicator for investors looking to build up a (new) position.Moving Averages (StockCharts.com)Alibaba Is A Gift At $85The market models $9.20 per share in profits for Alibaba Group Holding, which reflects an increase in expected profits of 10% YoY. Presently, the stock of Alibaba Group Holding is selling for $85, thus reflecting a leading profit multiple of 9.3x. Based on TTM earnings, Alibaba Group Holding stock is selling for just about a 10x profit multiple, which also makes BABA a bargain, in my view.My intrinsic value estimate for Alibaba Group Holding before I sold BABA was $118 and $128 per share, which I derived at using a 12-13x leading P/E ratio for the eCommerce company. However, when I explained my reasons for selling Alibaba Group Holding last month, I also indicated that I was looking to reenter into a long position at $80-90.As I clarified above, I am not a trader primarily, but I think that while Alibaba Group Holding's stock price shot up too high in October, it has now fallen too far, creating a favorable risk/reward relationship and a contrarian buying opportunity.The stock has now fallen back into my ‘Buy’ range, and I plan on adding more shares to my long position should Alibaba Group Holding's stock fall below $80.Growth Forecasts (CNBC)Why The Investment Thesis Might Turn Into A Bear CaseIn my previous piece about Alibaba Group Holding, I warned that the eCommerce company may not profit from a fiscal stimulus package that was primarily geared towards borrowers.However, my opinion has evolved in the sense that financial relief for mortgages could free up consumer spending and the uptick in China’s retail spending in October was obviously a positive sign that economic fundamentals might be improving.Together with a lower profit multiple for Alibaba Group Holding, I have decided that the risk/reward relationship is now more positive than it was just last month, and I am modifying my stock classification to a moderate ‘Buy.’On the flip side, should Beijing’s spending promises not materialize and fail to support consumer spending, then eCommerce companies of the likes of Alibaba Group Holding may continue to see only muted sales growth.My ConclusionAlibaba Group Holding is growing its sales in a difficult Chinese economy, but there is hope that things will get better, particularly if Beijing’s stimulus actions accelerate China’s economic growth.Retail sales growth in China accelerated to 4.8% in October, which is a very positive development for Alibaba Group Holding, whose main business is still centered on the Chinese consumer. With the upcoming shopping season typically benefiting Alibaba Group Holding as well, I think that investors may want to consider buying the stock of the eCommerce company now that it has fallen out of favor with investors and that it is selling for a much lower profit multiple than just last month.While I tend to avoid trading, Alibaba Group Holding's considerable consolidation since October clearly changes the investment analysis in favor of the eCommerce company. Contrarian Buy.Editor's Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.","kind":"news","is_publish_news":true,"is_publish_highlight":true,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":0},"commentList":[{"id":376410754699608,"gmtCreate":1732939912329,"gmtModify":1732939916394,"author":{"id":"3576326749731922","authorId":"3576326749731922","name":"Toby_Chua","avatar":"https://community-static.tradeup.com/news/82ec063fd73ccbceee82eab015cdf3fd","vip":1,"hat":"https://static.tigerbbs.com/b073a07f77dbe6b3bec6b12311fde6bd","crmLevel":7,"crmLevelSwitch":1,"authorIdStr":"3576326749731922","idStr":"3576326749731922"},"htmlText":"Trading delta $85 to $115 buy and sell for the last 3 years so far so good","listText":"Trading delta $85 to $115 buy and sell for the last 3 years so far so good","text":"Trading delta $85 to $115 buy and sell for the last 3 years so far so good","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":1,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/376410754699608","repostId":1107418003,"repostType":2,"repost":{"id":"1107418003","kind":"news","pubTimestamp":1732874224,"share":"https://ttm.financial/m/news/1107418003?lang=&edition=fundamental","pubTime":"2024-11-29 17:57","market":"us","language":"en","title":"Alibaba: Upgrade To A Contrarian Buy","url":"https://stock-news.laohu8.com/highlight/detail?id=1107418003","media":"Seeking Alpha","summary":"SummaryAlibaba's stock has dropped to $85, creating a contrarian buying opportunity due to improved macro data and better price-valuation tradeoff.China's retail sales growth surged to 4.8% in October","content":"<html><head></head><body><h2 id=\"id_857011943\">Summary</h2><ul style=\"\"><li><p>Alibaba&#39;s stock has dropped to $85, creating a contrarian buying opportunity due to improved macro data and better price-valuation tradeoff.</p></li><li><p>China&#39;s retail sales growth surged to 4.8% in October, benefiting Alibaba&#39;s domestic eCommerce, despite mixed growth in other segments.</p></li><li><p>Alibaba&#39;s stock is near oversold levels, making it a bargain with a leading profit multiple of 9.3x and an intrinsic value estimate of $118-$128.</p></li><li><p>The risk/reward relationship has improved, justifying a moderate &#39;Buy&#39; rating, contingent on Beijing&#39;s stimulus measures boosting consumer spending.</p></li></ul><p>The stock price of <strong>Alibaba Group Holding</strong> has fallen into a short-term down-channel which creates a buying opportunity for contrarian-minded investors, in my view.</p><p>Alibaba Group Holding’s stock has consolidated down to the $85 price level which reflects a major change in sentiment compared to September which is when Beijing announced stimulus measures to prop up its economy which in turn catalyzed a parabolic surge in valuations for Chinese companies.</p><p>With China’s retail spending growth surging in October, I think that BABA’s stock has sold off too much. Alibaba Group Holding reflects strong value at a present price of $85.24, and I am reopening a contrarian ‘Buy’ position for the eCommerce company due to improving macro data and a better price-valuation tradeoff.</p><h2 id=\"id_1360588690\">My Rating History</h2><p>My last stock classification for Alibaba Group Holding was ‘Sell’ because of what I perceived to be an unsustainable run in the company’s stock price in September. My opinions have also evolved in terms of a rebound in retail-driven spending in China’s economy.</p><p>Though my primary investment strategy is seeking out discounted investment value, and not trading, I like to highlight an opportunity when I see one, and therefore reverse my prior ‘Sell’ stock recommendation.</p><p>I have moved back into Alibaba Group Holding on Monday, particularly for valuation reasons.</p><h2 id=\"id_678770836\">China Retail Sales And Portfolio Growth</h2><p>Alibaba Group Holding produced 5% YoY sales growth in the last financial quarter and the eCommerce company reported total sales of RMB 236.5 billion which equates to $33.7 billion.</p><p>In the prior quarter Alibaba Group Holding’s sales rose 4%, so the eCommerce company benefited from faster sales growth, thanks primarily through a boost of growth in the company’s biggest segment, Taobao and Tmall Group, though the picture here was also a differentiated one.</p><p>China wholesale commerce sales surged to 6.0 billion Chinese Yuan ($853 million), reflecting 18% YoY growth, whereas Direct Sales plunged 5% YoY to 22.6 billion Chinese Yuan ($3.2 billion).</p><p>Direct sales include sales from Alibaba Group Holding&#39;s major eCommerce brands including Tmall Supermarket, Tmall Global and others. International eCommerce did substantially better, with the segment profiting from a sales surge of 29% and total sales of 31.7 billion Chinese Yuan ($4.5 billion).</p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/76ffd7ddb0d9437bbb5378696003e196\" alt=\"Consolidated Revenue (Alibaba Group Holding)\" title=\"Consolidated Revenue (Alibaba Group Holding)\" tg-width=\"640\" tg-height=\"481\"/><span>Consolidated Revenue (Alibaba Group Holding)</span></p><p>The difference in growth profiles for Alibaba Group Holding&#39;s eCommerce segments, domestic and international, highlights the fundamental growth problems the Chinese economy is going through. While the international eCommerce segment is booming, the growth profile in domestic eCommerce is much weaker.</p><p>A bloated, leveraged property sector and a soft recovery for China’s economy after Covid have been two reasons why China’s economy has grown much more slowly than anticipated. In the third quarter, China’s GDP grew only 4.6% YoY, less than the 5% growth target laid out by the CCP.</p><p>China’s retail sales are on an upswing, however, which could be a sign of things to come, particularly if Beijing’s fiscal and monetary stimulus measures bear fruit and help push China’s economy into a new accelerating growth phase. Beijing guided for a set of measures to stimulate spending and take pressure off of the financial and property sectors.</p><p>On the flip side, China’s retail sales rose to 4.8% in October, up from 3.2% in the prior month.</p><p>Obviously, growing spending in the retail sector would be a good development for Alibaba Group Holding as the company runs a number of Direct Sales business that would profit from consumers spending more money on food, beauty, or hardware products.</p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/79654996d89a2142b762fa37e5804277\" alt=\"China&#39;s Retail Sales (National Bureau of Statistics of China)\" title=\"China&#39;s Retail Sales (National Bureau of Statistics of China)\" tg-width=\"640\" tg-height=\"336\"/><span>China&#39;s Retail Sales (National Bureau of Statistics of China)</span></p><h2 id=\"id_500844745\">Technical Chart Analysis</h2><p>Alibaba Group Holding’s stock has suffered a precipitous decline since the start of October which is almost a perfect mirror image to the explosive rise in the stock price shortly after Beijing announced major fiscal stimulus support in order to support its flailing economic growth.</p><p>With that said, Alibaba Group Holding could be a potentially promising investment opportunity for investors that want to deploy some cash here now that the eCommerce company has fallen out of favor.</p><p>In November, Alibaba Group Holding crashed through the 50-day moving average trendline and presently the stock price sits just above the 200-day moving average, which could foreshadow a near-term challenge of this crucial trendline. From a sentiment point of view, holding the 200-day moving average would be preferable; otherwise, Alibaba Group Holding could see an ongoing decrease in its stock price to at least $75, which is where the eCommerce stock has built some prior support.</p><p>According to the Relative Strength Index, Alibaba Group Holding&#39;s stock is close to being oversold, which could be a contrarian indicator for investors looking to build up a (new) position.</p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/9ad470287617dbb74c6bfcfee771c4e6\" alt=\"Moving Averages (StockCharts.com)\" title=\"Moving Averages (StockCharts.com)\" tg-width=\"640\" tg-height=\"485\"/><span>Moving Averages (StockCharts.com)</span></p><h2 id=\"id_2490069826\">Alibaba Is A Gift At $85</h2><p>The market models $9.20 per share in profits for Alibaba Group Holding, which reflects an increase in expected profits of 10% YoY. Presently, the stock of Alibaba Group Holding is selling for $85, thus reflecting a leading profit multiple of 9.3x. Based on TTM earnings, Alibaba Group Holding stock is selling for just about a 10x profit multiple, which also makes BABA a bargain, in my view.</p><p>My intrinsic value estimate for Alibaba Group Holding before I sold BABA was $118 and $128 per share, which I derived at using a 12-13x leading P/E ratio for the eCommerce company. However, when I explained my reasons for selling Alibaba Group Holding last month, I also indicated that I was looking to reenter into a long position at $80-90.</p><p>As I clarified above, I am not a trader primarily, but I think that while Alibaba Group Holding&#39;s stock price shot up too high in October, it has now fallen too far, creating a favorable risk/reward relationship and a contrarian buying opportunity.</p><p>The stock has now fallen back into my ‘Buy’ range, and I plan on adding more shares to my long position should Alibaba Group Holding&#39;s stock fall below $80.</p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/5affd20560d3de6d48f52369fa3a01ba\" alt=\"Growth Forecasts (CNBC)\" title=\"Growth Forecasts (CNBC)\" tg-width=\"640\" tg-height=\"181\"/><span>Growth Forecasts (CNBC)</span></p><h2 id=\"id_2966009458\">Why The Investment Thesis Might Turn Into A Bear Case</h2><p>In my previous piece about Alibaba Group Holding, I warned that the eCommerce company may not profit from a fiscal stimulus package that was primarily geared towards borrowers.</p><p>However, my opinion has evolved in the sense that financial relief for mortgages could free up consumer spending and the uptick in China’s retail spending in October was obviously a positive sign that economic fundamentals might be improving.</p><p>Together with a lower profit multiple for Alibaba Group Holding, I have decided that the risk/reward relationship is now more positive than it was just last month, and I am modifying my stock classification to a moderate ‘Buy.’</p><p>On the flip side, should Beijing’s spending promises not materialize and fail to support consumer spending, then eCommerce companies of the likes of Alibaba Group Holding may continue to see only muted sales growth.</p><h2 id=\"id_69345856\">My Conclusion</h2><p>Alibaba Group Holding is growing its sales in a difficult Chinese economy, but there is hope that things will get better, particularly if Beijing’s stimulus actions accelerate China’s economic growth.</p><p>Retail sales growth in China accelerated to 4.8% in October, which is a very positive development for Alibaba Group Holding, whose main business is still centered on the Chinese consumer. With the upcoming shopping season typically benefiting Alibaba Group Holding as well, I think that investors may want to consider buying the stock of the eCommerce company now that it has fallen out of favor with investors and that it is selling for a much lower profit multiple than just last month.</p><p>While I tend to avoid trading, Alibaba Group Holding&#39;s considerable consolidation since October clearly changes the investment analysis in favor of the eCommerce company. Contrarian Buy.</p><p>Editor&#39;s Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.</p></body></html>","source":"lsy1728464409321","collect":0,"html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Alibaba: Upgrade To A Contrarian Buy</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; 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}\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nAlibaba: Upgrade To A Contrarian Buy\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-11-29 17:57 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4740822-alibaba-stock-upgrade-contrarian-buy><strong>Seeking Alpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>SummaryAlibaba's stock has dropped to $85, creating a contrarian buying opportunity due to improved macro data and better price-valuation tradeoff.China's retail sales growth surged to 4.8% in October...</p>\n\n<a href=\"https://seekingalpha.com/article/4740822-alibaba-stock-upgrade-contrarian-buy\">Web Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","type":0,"thumbnail":"","relate_stocks":{"09988":"阿里巴巴-W","BABA":"阿里巴巴"},"source_url":"https://seekingalpha.com/article/4740822-alibaba-stock-upgrade-contrarian-buy","is_english":true,"share_image_url":"https://static.laohu8.com/e9f99090a1c2ed51c021029395664489","article_id":"1107418003","content_text":"SummaryAlibaba's stock has dropped to $85, creating a contrarian buying opportunity due to improved macro data and better price-valuation tradeoff.China's retail sales growth surged to 4.8% in October, benefiting Alibaba's domestic eCommerce, despite mixed growth in other segments.Alibaba's stock is near oversold levels, making it a bargain with a leading profit multiple of 9.3x and an intrinsic value estimate of $118-$128.The risk/reward relationship has improved, justifying a moderate 'Buy' rating, contingent on Beijing's stimulus measures boosting consumer spending.The stock price of Alibaba Group Holding has fallen into a short-term down-channel which creates a buying opportunity for contrarian-minded investors, in my view.Alibaba Group Holding’s stock has consolidated down to the $85 price level which reflects a major change in sentiment compared to September which is when Beijing announced stimulus measures to prop up its economy which in turn catalyzed a parabolic surge in valuations for Chinese companies.With China’s retail spending growth surging in October, I think that BABA’s stock has sold off too much. Alibaba Group Holding reflects strong value at a present price of $85.24, and I am reopening a contrarian ‘Buy’ position for the eCommerce company due to improving macro data and a better price-valuation tradeoff.My Rating HistoryMy last stock classification for Alibaba Group Holding was ‘Sell’ because of what I perceived to be an unsustainable run in the company’s stock price in September. My opinions have also evolved in terms of a rebound in retail-driven spending in China’s economy.Though my primary investment strategy is seeking out discounted investment value, and not trading, I like to highlight an opportunity when I see one, and therefore reverse my prior ‘Sell’ stock recommendation.I have moved back into Alibaba Group Holding on Monday, particularly for valuation reasons.China Retail Sales And Portfolio GrowthAlibaba Group Holding produced 5% YoY sales growth in the last financial quarter and the eCommerce company reported total sales of RMB 236.5 billion which equates to $33.7 billion.In the prior quarter Alibaba Group Holding’s sales rose 4%, so the eCommerce company benefited from faster sales growth, thanks primarily through a boost of growth in the company’s biggest segment, Taobao and Tmall Group, though the picture here was also a differentiated one.China wholesale commerce sales surged to 6.0 billion Chinese Yuan ($853 million), reflecting 18% YoY growth, whereas Direct Sales plunged 5% YoY to 22.6 billion Chinese Yuan ($3.2 billion).Direct sales include sales from Alibaba Group Holding's major eCommerce brands including Tmall Supermarket, Tmall Global and others. International eCommerce did substantially better, with the segment profiting from a sales surge of 29% and total sales of 31.7 billion Chinese Yuan ($4.5 billion).Consolidated Revenue (Alibaba Group Holding)The difference in growth profiles for Alibaba Group Holding's eCommerce segments, domestic and international, highlights the fundamental growth problems the Chinese economy is going through. While the international eCommerce segment is booming, the growth profile in domestic eCommerce is much weaker.A bloated, leveraged property sector and a soft recovery for China’s economy after Covid have been two reasons why China’s economy has grown much more slowly than anticipated. In the third quarter, China’s GDP grew only 4.6% YoY, less than the 5% growth target laid out by the CCP.China’s retail sales are on an upswing, however, which could be a sign of things to come, particularly if Beijing’s fiscal and monetary stimulus measures bear fruit and help push China’s economy into a new accelerating growth phase. Beijing guided for a set of measures to stimulate spending and take pressure off of the financial and property sectors.On the flip side, China’s retail sales rose to 4.8% in October, up from 3.2% in the prior month.Obviously, growing spending in the retail sector would be a good development for Alibaba Group Holding as the company runs a number of Direct Sales business that would profit from consumers spending more money on food, beauty, or hardware products.China's Retail Sales (National Bureau of Statistics of China)Technical Chart AnalysisAlibaba Group Holding’s stock has suffered a precipitous decline since the start of October which is almost a perfect mirror image to the explosive rise in the stock price shortly after Beijing announced major fiscal stimulus support in order to support its flailing economic growth.With that said, Alibaba Group Holding could be a potentially promising investment opportunity for investors that want to deploy some cash here now that the eCommerce company has fallen out of favor.In November, Alibaba Group Holding crashed through the 50-day moving average trendline and presently the stock price sits just above the 200-day moving average, which could foreshadow a near-term challenge of this crucial trendline. From a sentiment point of view, holding the 200-day moving average would be preferable; otherwise, Alibaba Group Holding could see an ongoing decrease in its stock price to at least $75, which is where the eCommerce stock has built some prior support.According to the Relative Strength Index, Alibaba Group Holding's stock is close to being oversold, which could be a contrarian indicator for investors looking to build up a (new) position.Moving Averages (StockCharts.com)Alibaba Is A Gift At $85The market models $9.20 per share in profits for Alibaba Group Holding, which reflects an increase in expected profits of 10% YoY. Presently, the stock of Alibaba Group Holding is selling for $85, thus reflecting a leading profit multiple of 9.3x. Based on TTM earnings, Alibaba Group Holding stock is selling for just about a 10x profit multiple, which also makes BABA a bargain, in my view.My intrinsic value estimate for Alibaba Group Holding before I sold BABA was $118 and $128 per share, which I derived at using a 12-13x leading P/E ratio for the eCommerce company. However, when I explained my reasons for selling Alibaba Group Holding last month, I also indicated that I was looking to reenter into a long position at $80-90.As I clarified above, I am not a trader primarily, but I think that while Alibaba Group Holding's stock price shot up too high in October, it has now fallen too far, creating a favorable risk/reward relationship and a contrarian buying opportunity.The stock has now fallen back into my ‘Buy’ range, and I plan on adding more shares to my long position should Alibaba Group Holding's stock fall below $80.Growth Forecasts (CNBC)Why The Investment Thesis Might Turn Into A Bear CaseIn my previous piece about Alibaba Group Holding, I warned that the eCommerce company may not profit from a fiscal stimulus package that was primarily geared towards borrowers.However, my opinion has evolved in the sense that financial relief for mortgages could free up consumer spending and the uptick in China’s retail spending in October was obviously a positive sign that economic fundamentals might be improving.Together with a lower profit multiple for Alibaba Group Holding, I have decided that the risk/reward relationship is now more positive than it was just last month, and I am modifying my stock classification to a moderate ‘Buy.’On the flip side, should Beijing’s spending promises not materialize and fail to support consumer spending, then eCommerce companies of the likes of Alibaba Group Holding may continue to see only muted sales growth.My ConclusionAlibaba Group Holding is growing its sales in a difficult Chinese economy, but there is hope that things will get better, particularly if Beijing’s stimulus actions accelerate China’s economic growth.Retail sales growth in China accelerated to 4.8% in October, which is a very positive development for Alibaba Group Holding, whose main business is still centered on the Chinese consumer. With the upcoming shopping season typically benefiting Alibaba Group Holding as well, I think that investors may want to consider buying the stock of the eCommerce company now that it has fallen out of favor with investors and that it is selling for a much lower profit multiple than just last month.While I tend to avoid trading, Alibaba Group Holding's considerable consolidation since October clearly changes the investment analysis in favor of the eCommerce company. Contrarian Buy.Editor's Note: This article discusses one or more securities that do not trade on a major U.S. exchange. 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