Loop Capital Analysts Lower $Alibaba(BABA)$ 's Target Price to $111, Still Recommend Buying
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On Monday, the shares of Chinese e-commerce giant $Alibaba(BABA)$ closed up 3.9%. In the morning of the same day, Loop Capital analysts lowered the target price from $115 to $111, but still believed that Alibaba, as a Chinese Internet stock, was worth buying. This may also explain why Alibaba's shares have risen instead of falling.
How does Loop Capital view Alibaba?
Loop Capital didn't just talk about Alibaba's stock. Instead, it conducted a research and analysis of the entire Chinese Internet stock market.
Overall, China's "weak" consumer confidence and "weak" job market are putting pressure on economic growth, even for Internet stocks that should have been in growth mode, the investment bank said.
However, for Internet service providers like Alibaba, China is still the largest market in the world. It cannot be denied that although Alibaba and other Chinese Internet stocks are facing various unfavorable situations now, Loop Capital believes that the valuation of these stocks has been "over-punished". Given enough time, valuation repair will be inevitable.
So what about Alibaba's stock?
Although Chinese Internet stocks still face regulatory risks, Loop Capital is right on at least one point: they are already cheap enough.
While Alibaba's growth rate has not been as good as before, the market expects that the company's annual profit growth rate in the next five years will still be higher than 12%. In contrast, the static price-to-earnings ratio is only 10, with a dividend yield of 1.4%.
In addition, the company has nearly $80 billion in cash on its balance sheet (and less than $28 billion in debt), accounting for nearly 30% of its market capitalization, while free cash flow is positive at $24.5 billion.
So, the best keyword to describe Alibaba's stock valuation is undoubtedly "cheap".
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