Alibaba Stock: BABA Looks Juicy Ahead Of Earnings

seekingalpha2023-08-09

IntroductionAlibaba Group Holding Ltd. (NYSE:BABA) is all set to release its FQ1 2024 report on Thursday 10th August 2023 in pre-market hours. Heading into this week's pivotal earnings release, ...

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hphoa
·2023-08-09
Wow......juicy I like
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KLCC
·2023-08-09
Juicy!! Accumulating...
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(NYSE:BABA) is all set to release its FQ1 2024 report on Thursday 10th August 2023 in pre-market hours. Heading into this week's pivotal earnings release, ...</p>\n\n<a href=\"https://seekingalpha.com/article/4625220-alibaba-stock-baba-looks-juicy-ahead-of-earnings\">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":"IE00BFSS8Q28.SGD","symbol_name":"Janus Henderson Balanced A Inc SGD-H","start_time":0,"source_url":"https://seekingalpha.com/article/4625220-alibaba-stock-baba-looks-juicy-ahead-of-earnings","article_id":"2357242291","we_media_id":null,"thumbnails":[],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2357242291","pubTimestamp":1691544107,"sourceInfo":{"source_id":"seekingalpha","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"While I don't expect to see any fireworks from Alibaba this quarter, I do hope to see further improvements in free cash flow generation as the business returns to topline growth (","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"IE00BFSS8Q28.SGD":"Janus Henderson Balanced A Inc SGD-H","BABA":"阿里巴巴","BK4554":"元宇宙及AR概念","LU0149725797.USD":"汇丰美国股市经济规模基金","BK4553":"喜马拉雅资本持仓","BK4585":"ETF&股票定投概念","BK4534":"瑞士信贷持仓","LU1051768304.USD":"贝莱德新兴市场股票收益A6","BK4576":"AR","LU0348723411.USD":"ALLIANZ GLOBAL HI-TECH GROWTH \"A\" (USD) INC","IE00BLSP4239.USD":"Legg Mason ClearBridge - Tactical Dividend Income A Mdis USD Plus","LU1046422090.SGD":"Fidelity Pacific A-SGD","LU0251143458.SGD":"Fidelity Emerging Markets A-SGD","IE00BLSP4452.SGD":"Legg Mason ClearBridge - Tactical Dividend Income A Mdis SGD-H Plus","BK4566":"资本集团","LU0234570918.USD":"高盛全球核心股票组合Acc Close","IE00B19Z9505.USD":"美盛-美国大盘成长股A Acc","BK4220":"综合零售","LU0053666078.USD":"摩根大通基金-美国股票A（离岸）美元","IE00BJJMRX11.SGD":"Janus Henderson Balanced A Acc SGD","LU0072462426.USD":"贝莱德全球配置 A2","BK4501":"段永平概念","BK4527":"明星科技股","BK4559":"巴菲特持仓","BK4538":"云计算","LU0082616367.USD":"摩根大通美国科技A（dist）","BK4579":"人工智能","BK4550":"红杉资本持仓","BK4526":"热门中概股","BK4503":"景林资产持仓","BK4574":"无人驾驶","LU0308772762.SGD":"Blackrock Global Allocation A2 SGD-H","IE00BJJMRY28.SGD":"Janus Henderson Balanced A Inc SGD","BK4502":"阿里概念","IE00BBT3K403.USD":"LEGG MASON CLEARBRIDGE TACTICAL DIVIDEND INCOME \"A(USD) ACC","09988":"阿里巴巴-W","IE00BSNM7G36.USD":"NEUBERGER BERMAN SYSTEMATIC GLOBAL SUSTAINABLE VALUE \"A\" (USD) ACC","LU0234572021.USD":"高盛美国核心股票组合Acc","LU0109392836.USD":"富兰克林科技股A","BK4504":"桥水持仓","IE00BZ1G4Q59.USD":"LEGG MASON CLEARBRIDGE US EQUITY SUSTAINABILITY LEADER \"A\"(USD) INC (A)","IE0004445015.USD":"JANUS HENDERSON BALANCED \"A2\" (USD) ACC","LU0011850046.USD":"贝莱德全球长线股票 A2 USD","LU0821914370.USD":"贝莱德亚洲成长领袖A2","BK4170":"电脑硬件、储存设备及电脑周边","BK4565":"NFT概念","LU0320765059.SGD":"FTIF - Franklin US Opportunities A Acc SGD","LU1688375341.USD":"贝莱德中国灵活股票基金","IE00B1BXHZ80.USD":"Legg Mason ClearBridge - US Appreciation A Acc USD"},"translate_title":"阿里巴巴-SW股票：巴巴看起来利润丰厚","themeId":"","isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"BABA":1,"09988":0.6},"content_text":"IntroductionAlibaba Group Holding Ltd. (NYSE:BABA) is all set to release its FQ1 2024 report on Thursday 10th August 2023 in pre-market hours. Heading into this week's pivotal earnings release, Alibaba's stock is showing strong momentum after breaking out of the falling wedge pattern we discussed in my previous report.WeBull DesktopIn Alibaba Stock: A Screaming Buy At <9x P/FCF, I shared the following view on BABA's technical setup:If the stock manages to break out of the descending triangle [marked in purple on the chart below] to the upside (>$90), I see Alibaba stock rallying up to the $120 level (top end of its Stage-I base formation) in quick order. Furthermore, an upside breakout above $120 would represent a qualified \"Inverse Head & Shoulders\" pattern, and the price objective for this formation is roughly $180.Alibaba Stock Chart (6/2/2023) (WeBull Desktop)On the flip side, if Alibaba's stock reverses again and fails to hold the $77-78 level, the stock will likely break down back to the lower end of its Stage-I base at ~$70.In my view, the near to medium-term risk/reward based on technicals is skewed to the upside, and the setup is highly favorable for investors/traders looking to go long BABA at current levels.With Alibaba breaking out of the falling wedge pattern, a run-up to $120 is looking likely, and a strong earnings report this week could serve as the trigger for such a bullish move. In this note, we will preview Alibaba's quarterly report, and re-evaluate its absolute valuation.What To Expect From Alibaba's EarningsAfter experiencing astronomical sales growth during 2020-21 due to a COVID-induced pull forward in demand, Alibaba has struggled for topline growth in recent quarters. And while China's ongoing economic woes and regulatory crackdown on the tech sector continue to weigh heavily on BABA's business, management's renewed focus on profitability had allowed Alibaba's TTM free cash flow to rebound back up to ~$25B as of FQ4 2023.Seeking AlphaSeeking AlphaFor FQ1 2024, Alibaba is projected to deliver revenues and normalized EPS of $31.48B (+3.3% y/y) and $2.02 (+16% y/y), respectively. Despite a recent uptick, consensus estimates for both revenue and EPS have shifted lower over the last three months, as can be observed in the charts below:Seeking AlphaSeeking AlphaDuring April-June 2023, China's GDP grew by just +0.8% q/q (down from +2.2% q/q growth in Q1 2023), raising fears of a severe economic slowdown in the second-largest economy in the world. While the macroeconomic environment remains challenging, the Chinese government's tech sector crackdown is easing off, and expectations of further fiscal stimulus are rising.Given its incredible market penetration (1B+ users), Alibaba is set to benefit from China's re-opening and any sort of fiscal stimulus! While I don't expect to see any fireworks from Alibaba this quarter, I do hope to see further improvements in free cash flow generation as the business returns to topline growth (in USD) after four quarters of negative growth rates. Please note that Alibaba has registered positive revenue growth in local currency (RMB) for the last two quarters. And in my view, a weaker US dollar and easier comps (vs. FQ1 2023) have set up Alibaba for an earnings beat here. The quantum of such a beat is hard to gauge given current macroeconomic uncertainties (and will likely be minimal); however, I have a more optimistic view of BABA's financial performance compared to the consensus outlook going into Alibaba's FQ1 2024 report.BABA's Long-Term Thesis Is Simple And SoundWhile Alibaba is struggling to find revenue growth amid economic doldrums in China, BABA's management has made several shareholder-friendly moves in recent months, including cost optimization efforts across the business (improving profitability and cash flow generation), enhancement of Alibaba's capital return program, and business reorganization (breakup into six different units announced in Q1).Despite registering negative topline growth in recent quarters, Alibaba's free cash flow generation has rebounded sharply as a result of ongoing cost-optimization efforts from the Chinese tech conglomerate.Data by YChartsAlibaba's core e-commerce business seems to have hit terminal growth; however, Cloud and International e-commerce are rapidly growing business segments that have immense growth potential. As you may know, Alibaba has made several key AI product announcements in recent months, and as the leading cloud provider in China, I think Alibaba Cloud is just getting started! With the cloud business expected to be spun off in the coming quarters, I believe management is set to unlock a tremendous amount of shareholder value for BABA investors.In my view, the near-term business outlook for Alibaba remains uncertain; however, the long-term outlook is robust, with Alibaba's revenue growth projected to accelerate back up to high-single-digits this year and stay there for the next couple of years.Seeking AlphaWhile I have repeatedly highlighted BABA's relative valuation discount in my past research work, the gulf between Chinese and US mega-cap tech names has probably never been broader! For example, Alibaba is trading at an EV/FCF multiple of ~7.3x, whereas Apple (AAPL) is trading at an EV/FCF multiple of ~28.66x despite the former registering higher growth rates in recent quarters and boasting stronger projected growth rates. Yes, I understand the idea that Chinese stocks deserve to trade at a discount due to various risks associated with China; however, a 75% discount is simply ridiculous. Not so long ago, Alibaba stock traded at a premium to Apple on an EV/FCF basis. And I think that Alibaba can trade at a premium to Apple once again in a few years' time.Data by YChartsIf you have been following my research on SA, you know that I am currently bearish on Apple, with my fair value pegged at ~$120 per share. On the other hand, I am bullish on Alibaba, with my fair value estimate for BABA pegged at ~$180 per share. Here's my valuation model for BABA:TQI Valuation Model TQIG.orgAs you can see above, Alibaba is worth ~$177 per share or $462B, i.e., BABA stock has an upside of ~84% to its fair value.Assuming a conservative exit multiple of ~15x P/FCF (a \"China\" discount is embedded into this assumption), Alibaba's stock could be trading at ~$412 five years from now (by 2028). This price target implies a 5-yr CAGR return of ~34% from current levels.TQI Valuation Model (TQIG.org)Since Alibaba's expected 5-yr CAGR return is far greater than my investment hurdle rate of 15%, I view BABA as a truly asymmetric risk/reward bet. Right now, investing in Chinese equities is believed to be riskier than in most other foreign markets due to heightened geopolitical tensions with the US and economic problems within China. However, in Alibaba, investors are being handsomely compensated for taking on this perceived risk. At ~8-10x P/FCF (~6-8x EV/FCF), Alibaba stock is a no-brainer buy for long-term investors.We have already reviewed Alibaba's technical setup in an earlier section of this note, and so I won't discuss it again. But technically, Alibaba stock looks set for a run up to $120, and if we can break above that key level, BABA could be headed to $180 per share in the next 6-12 months. On the flip side, BABA has strong long-term support in the $60-80 range, and it is hard to fathom a break below this range. Clearly, the near-term risk/reward in BABA is also skewed to the upside.Furthermore, Alibaba's quant factor grades have strengthened considerably since I last wrote about the company in early June:Seeking AlphaSince my last update (two months ago), BABA's Quant Rating score has improved from 4.67/5 to 4.80/5. This improvement has been driven by a positive upgrade in \"Momentum\" (C+ to B-), \"Valuation\" (C+ to B), and \"Growth\" (C to B-), partially offset by a negative downgrade in \"Revisions\" (C+ to C). During this time, BABA's \"Profitability\" grade has held strong at \"A+\".As of writing, Alibaba is a \"Strong Buy\" based on SA's Quant Rating System. Furthermore, Seeking Alpha and Wall Street analysts are in agreement with my bullish outlook for Alibaba.TipRanksGoing into its FQ1 2024 report, Alibaba has received multiple \"Buy\" ratings from Wall Street analysts in recent weeks, with the consensus 12-month price target now standing at $143 per share.Concluding ThoughtsBased on our Quantamental Analysis process (mix of fundamental, quantitative, technical, and valuation analysis), Alibaba is a \"Strong Buy\". Given the current macroeconomic woes in China, Alibaba's near-term business outlook remains uncertain. However, Alibaba looks set to report another earnings beat due to multiple factors shared earlier in this note.Going into the FQ1 2024 report, Alibaba is one of my largest positions. At <9x P/FCF, Alibaba is still a no-brainer buy for long-term investors; and so, I will be accumulating BABA shares around (before and after) its earnings report.Key Takeaway: I rate Alibaba a \"Strong Buy\" at ~$96.","kind":null,"is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[{"id":207040847265920,"gmtCreate":1691576208063,"gmtModify":1691576213905,"author":{"id":"3578790486524477","authorId":"3578790486524477","name":"hphoa","avatar":"https://community-static.tradeup.com/news/28a11e936497493af7ee5ccdc32238a3","vip":1,"crmLevel":5,"crmLevelSwitch":0,"idStr":"3578790486524477","authorIdStr":"3578790486524477"},"htmlText":"Wow......juicy I like&nbsp;","listText":"Wow......juicy I like&nbsp;","text":"Wow......juicy I like","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":1,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/207040847265920","repostId":2357242291,"repostType":2,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":207035896844496,"gmtCreate":1691564338401,"gmtModify":1691564342682,"author":{"id":"3582008315299880","authorId":"3582008315299880","name":"KLCC","avatar":"https://community-static.tradeup.com/news/fe1f9de5ef093e39ed1efb519dd44002","vip":1,"crmLevel":4,"crmLevelSwitch":1,"idStr":"3582008315299880","authorIdStr":"3582008315299880"},"htmlText":"Juicy!! Accumulating...","listText":"Juicy!! Accumulating...","text":"Juicy!! Accumulating...","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":2,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/207035896844496","repostId":2357242291,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"}],"hasMoreComments":true,"newsSizeData":{"likeSize":36,"commentSize":2,"repostSize":2,"favoriteSize":2,"likeStatus":false,"favoriteStatus":false}}