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The Zacks Analyst Blog Highlights: Alibaba, JD.com, Amazon, Microsoft and Alphabet

Zacks Equity Research
Alibaba (BABA) to stiffen competition in the Indian online video market with investment in Vmate.

For Immediate Release

Chicago, IL –May 29, 2019 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Alibaba BABA, JD.com JD, Amazon AMZN, Microsoft MSFT and Alphabet GOOGL.

Here are highlights from Tuesday’s Analyst Blog:

Why You Should Buy Alibaba (BABA) Now

With U.S.-China trade relations turning sour, it’s been a generally good idea to bail out of stocks with China exposure. But not all stocks are made the same, a case in point being Alibaba.

Here are some solid reasons you should be buying this stock-

1. China’s leading ecommerce company has a solid track record. Between fiscal years 2016 to 2019 (ending March), revenue grew more than 254% while earnings grew around 138%. In the just reported quarter, revenue grew 21.7% while earnings before non-recurring items grew 63.0%. Moreover, it guided to a revenue increase of 33% in fiscal year 2020 to RMB 500 billion.

2. The leading Chinese ecommerce company by far has 58% share in the country as of June 2018 (Statista) with the second player JD.com remaining far behind at 16%. Since Alibaba primarily operates in China, i.e., its business activity is primarily in China, it has Chinese government support. The Chinese population is large and Chinese disposable income continues to increase, making it a good market for sellers.

3. Alibaba caters to practically every ecommerce need like food ordering, film and TV, and a ubiquitous mobile and online payments platform (Alipay). The company also has a huge cloud infrastructure business that is even more dominant in China than Amazon is in the U.S.

Alibaba’s relatively later start has not been a problem for the company because of the government’s protectionism, something that the company can expect to continue in the future. Since the Chinese market is far larger than the U.S. and Chinese competition in the space is even further behind than Microsoft and Alphabet, Alibaba has a solid growth path waiting for it.  

4. Moody’s has a positive view of the company’s strengths. SVP Lina Choi says, "We expect that Alibaba's strong revenue growth and robust operating cash flow generation will continue to support its investment needs, and a credit profile appropriate for its A1 ratings."

5. The trade war, especially the last round of Trump tariffs has sent its shares crashing, so that they are now at quite an attractive valuation. As a result, the P/E based on forward 12 months earnings of 28.88X is well below the median value of 33.58 over the past year. It’s also better than the industry’s 38.37X.

6. Interestingly, Alibaba is reportedly considering a Hong Kong listing to raise $20 billion according to people with confidential knowledge of the matter. The company needs to maintain liquidity and increase investment in technology is all we are getting from the read. But considering the U.S. government’s strong stand with respect to Huawei and Hong Kong recently relaxing its listing requirements, Alibaba may be looking to raise funds that can help it pull out of the U.S.

Market watcher and former Trump chief adviser Steve Bannon’s recent comment in the South China Morning Post reads: "The next move we make is to cut off all the IPOs, unwind all the pension funds and insurance companies in the U.S. that provide capital to the Chinese Communist Party." If this is true, it could be an opportunity to make some money.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.


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