The last time that I covered Alibaba was in January 2019. Back then, Alibaba had not yet launched a secondary listing in Hong Kong and the former British colony was in complete turmoil with the unrelenting civil protests. To make matters worse, the company’s US stock was reeling from the devastating fallout from the US-China trade war. Since then, Alibaba (HKG: 9988) was listed in Hong Kong but the landscape has turned significantly darker with the onset of COVID-19 pandemic. And then, there is the Ant Group IPO fiasco.
Given the series of unfortunate events, is it the right time to invest in Alibaba (9988) now?
Recently, a member wrote in to ask for my insights on the leading Chinese e-commerce giant. Indeed, investing in Alibaba (9988) has not been easy because of the unfolding events. But if investors are willing to invest in this stock for the long-term, Alibaba (9988) could be a good match for Amazon stock, which surged 10-fold in value from 2015 to 2021.
The enduring form of Amazon proved that e-commerce is here to stay. In my opinion, this sector will only keep growing exponentially due to lifestyle trending and global digitization. For Alibaba (9988), the upside potential is even much bigger with Chinese PRC market as the hinterland.
Despite the solid business outlook for Alibaba (9988), we could see the online retailing company embroiled in significant regulatory headwinds in the short term. On the flipside, these downsides could provide the golden opportunities for investors to accumulate Alibaba (9988) on the cheap.
Indeed, it is the perfect storm for Alibaba (9988). In the past few months, Alibaba found itself in big trouble with the Chinese regulators after the founder, Jack Ma, blasted global regulators for stifling innovation in the financial system. The criticism did not go down well with the Chinese authorities. Arising from this, the Chinese authorities clamped down the activities of Alibaba and launched an anti-monopoly investigation on the e-commerce giant. In this article, I will share my views on the outlook for Alibaba (9988).
Note that this is an opinion article and not meant to be a financial advice. Please do your due diligence or engage financial advisors before investing in the stock market. Furthermore, I am not vested and have never invested in Alibaba (9988) before. Whether Alibaba (9988) share price will surge or collapse has no impact on me. Thus, this article is not meant to induce readers to make any form of investment decisions.
Alibaba (9988) share price at turning point
Notwithstanding the regulatory mess it is facing now, the business fundamentals of Alibaba remain intact. Right now, the biggest catalyst for this counter is the rapid recovery of China’s economy. In fact, the 3rd quarter result showed that Alibaba recorded revenue growth of 37% year-over-year and net income increase of 56% year-over-year. For 9MFY2020, the diluted EPS was RMB7.09 (HKD8.50). At current price of HKD262, this translates to P/E of about 31. Assuming that the EPS for full-year FY2020 is HKD12 and P/E of 30, the target price for Alibaba (9988) is[This is a premium article. The rest of the content is blocked and can be accessible by SG Wealth Builder Members only. To read the full content, please sign up as member.]
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