Alibaba Group Holding Limited (NYSE:BABA) received a lot of attention from a substantial price movement on the NYSE over the last few months, increasing to US$178 at one point, and dropping to the lows of US$112. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Alibaba Group Holding's current trading price of US$119 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Alibaba Group Holding’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
Is Alibaba Group Holding still cheap?
Great news for investors – Alibaba Group Holding is still trading at a fairly cheap price. My valuation model shows that the intrinsic value for the stock is $178.06, which is above what the market is valuing the company at the moment. This indicates a potential opportunity to buy low. What’s more interesting is that, Alibaba Group Holding’s share price is theoretically quite stable, which could mean two things: firstly, it may take the share price a while to move to its intrinsic value, and secondly, there may be less chances to buy low in the future once it reaches that value. This is because the stock is less volatile than the wider market given its low beta.
Can we expect growth from Alibaba Group Holding?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. With profit expected to grow by 24% over the next couple of years, the future seems bright for Alibaba Group Holding. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.
What this means for you:Are you a shareholder?
Since BABA is currently undervalued, it may be a great time to accumulate more of your holdings in the stock. With an optimistic outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as capital structure to consider, which could explain the current undervaluation.
Are you a potential investor?
If you’ve been keeping an eye on BABA for a while, now might be the time to enter the stock. Its prosperous future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy BABA. But before you make any investment decisions, consider other factors such as the strength of its balance sheet, in order to make a well-informed buy.
source：NASDAQ
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