Alibaba Stock ( NYSE:BABA )
Despite wild price swings and shares bottoming out below $60 in October, I have stayed bullish on Alibaba ( NYSE:BABA ), the Chinese tech conglomerate. While I will be the first to admit that it was painful to watch shares drop consistently in 2021 and 2022, it was a reminder that it’s only a loss on paper until you sell and realize that loss. It’s one thing to sell and cut your losses when the investment thesis breaks, but I didn’t (and still haven’t) see any signs that the thesis on Alibaba was broken. The sentiment was driving the price down, and I’m patient enough to wait for that to turn around. In the last three months, it seems like that sentiment has changed, with China’s reopening and a massive rally in Alibaba’s shares.
Investment Thesis
Things have started to look up for Alibaba and its shareholders as the Chinese economy is reopening due to the abandonment of the zero-COVID government policy. In recent weeks, there have been several developments, including golden share arrangements and Jack Ma relinquishing control of the Ant Group subsidiary , in which Alibaba owns a 1/3 stake. Activist investor Ryan Cohen recently announced his own stake in Alibaba and is pushing for more buybacks.
I like the company’s buyback program which has been put to good use in recent quarters, but I would lean towards new investments instead of more buybacks in the future, especially if the share price continues to rally. Even though shares have basically doubled off the bottom, shares are still attractive today just over 15x earnings. It’s not as cheap as it was, but if you look at the company’s balance sheet and subsidiaries, I still think there is a significant upside for patient investors. Sentiment has continued to improve in the last c...
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