Why Alibaba Stock Popped over 6% Today?

Motley Fool2021-12-22

What happened

Shares of Alibaba(NYSE:BABA)stock bounced back from yesterday's tech sell-off, gaining 6.89% on Tuesday as stock market analysts debated whether the company's just-announced turnaround plan will work or not.

So what

Hong Kong-based investment bank CLSA led off with the bull argument, calling Alibaba stock "cheap" at its recent price under $123 a share. CLSA predicts that as Chinese consumer spending grows, as Alibaba expands further into international markets, and as Alibaba's own technology improves, these three "strategic engines" will propel the company's growth, reports TheFly.com.

Of these three "engines," CLSA places the greatest weight on Alibaba's technological prowess, saying the company "enjoys unparalleled competitive advantages and a strong technological lead," in particular in cloud-based computing, which will be "the next big growth pillar" for Alibaba stock.

In its bearish rebuttal, though, U.K. stock broker Atlantic Equities says it has little confidence that Alibaba's Taobao and Tmall subsidiaries will perform well in the near term. The analyst agrees that Alibaba stock looks "inexpensive" at 17.5 times earnings. Still, Atlantic worries that Alibaba's "aggressive" spending on improving the technology that so impresses CLSA won't necessarily pay off for Alibaba. And in particular, Atlantic sees the company's investments in "AliCloud" as being only a "modest" catalyst for the stock.

Now what

For today, it appears that investors are buying CLSA's argument over Atlantic Equities'.

Ultimately, though, this debate is going to come down to growth. Sure, 17.5 times earnings looks like avalue price for Alibaba stock -- but only if the company can produce enough growth to justify the valuation. While it's true that Alibaba has exhibited some fine growth in the past (a 30% compound rate of growth in earnings over the last five years for example, according to S&P Global Market Intelligence data), over the next five years, most analysts don't see the company producing even 10% annual earnings growth -- but less than 9% instead.

If that's the best Alibaba ends up doing, I fear that today's rebound in stock price will be short-lived.

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精彩评论

  • saya_
    2021-12-23
    saya_
    Bloop bloop
  • Jialatsia
    2021-12-22
    Jialatsia
    Meep
  • LimLS
    2021-12-22
    LimLS
    Alibaba going up and down for a single day or few days is normal nowadays. Very volatile. Need to track its performance over many more days to see where it is going. One day price movement Just do not provide any good information, however big it might be.
    • dimsum
      There is no doubt that investing in Alibaba is equivalent to investing in the future.
    • qingg123
      If I had to choose between Alibaba and JD.COM, I would choose the latter.
    • waipoin
      No matter how bad Alibaba's performance in 2021 is, the company is still an excellent company.
    • falleno
      Alibaba's share price is now at a low level. There's nothing wrong with buying now.
    • cutieee
      Your idea is right. Rome wasn't built in a day, and the stock price performance of a day can't represent whether a company's stock is worth buying.
  • SanWangtikup
    2021-12-22
    SanWangtikup
    Good
  • kenjoe
    2021-12-22
    kenjoe
    Alibaba will last. 
  • DragonKC
    2021-12-22
    DragonKC
    Those have interest in Baba will say it's stock is cheap, whereas those bet again BaBa will bring  down price.  Everyone has their own agenda.  Best to judge ourselves. 
    • WenJieChan
      [smile]
    • keaty
      I stop buying for a while now. not so soon the china... thing go away
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