While it’s true that you should be cautious when buying Chinese stock, I believe that Alibaba (BABA) is a great stock, especially for long term holding.
It’s by far the largest company in the e-commerce sector for non-U.S. companies and is often referred to as the “Amazon of China.” By itself that tells you a lot about how important this company is.
Alibaba’s website refers to the company as a multinational technology company specializing in e-commerce, retail, Internet, and technology. BABA also controls the largest portion of the advertising sector for China, which a lot of people may not know.
Since the merchants fulfill their own orders, BABA makes their money off of listing fees and commission. As a result, the company generates higher operating margins, even compared to Amazon.
Since it went public back in 2014, BABA has quadrupled in value. Despite the ongoing concerns with Covid-19, the company has managed to increase its share price substantially from its March low of around $170.
It has currently been sitting around the $290, which means if you were lucky enough to get in around the low, you could already be up almost $120 per share in less than five months.
And that’s if you only owned one share. That’s a pretty good buy if you ask me.
BABA has an earnings per share (EPS) of $8.41. One of its main rivals, JD.com (JD), has an EPS of $0.55. This just shows you that BABA is an absolute powerhouse of a company in this sector.
A lot of analysts have a bullish outlook for BABA. Out of 47 analysts on Yahoo! Finance, 29 list BABA as a “buy” and 18 list it as a “strong buy.”
Analysts also see BABA growing at a steady rate over the next several years, and some believe it could grow by 20% per year, which is substantial.
If this were the case, then BABA could be worth over $2,200 per share in the next 10 years.
The company is currently sitting on a lot of cash, which is great in times of uncertainty. Its free cash flow per share (FCF) is just under $11 per share.
It is important to look at what kind of cash a company has on hand when events like Covid-19 happen because it will show us whether or not that particular company can withstand the storm.
Return on equity (ROE) and return on invested capital (ROIC) for the trailing twelve months (TTM) show great numbers at 23% and 19%. Seeing these numbers so high is a great sign that they have been doing things right.
With so many companies struggling to keep their heads above water and many even having to file for bankruptcy, I think it is a good sign that BABA is continuing to push forward and grow, while not having to take on extra debt.
It seems that regardless of which way the market is swinging, BABA is a strong stock with great numbers and a promising future.