Thursday, December 28, 2017 10:11:19 AM
Alibaba Grp
172.64
-0.19%
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[url]https://www.investopedia.com/news/why-alibaba-may-rebound-20-or-more-2018/
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Alibaba Group Holding Ltd. (BABA
BABA
Alibaba Grp
172.64
-0.19%
) has seen its stock rise by nearly 97% in 2017, beating the S&P 500's return of about 20%. But more recently shares of the China-based online retailer have underperformed the market, with shares falling by nearly 10% since November 24. This could present an exciting opportunity to investors using both technical and fundamental analysis.
Alibaba trades at just 21 times fiscal 2020 earnings estimates of $8.41, according to Ycharts, while the stock currently rests at a critical technical support level around $170. It could be signaling that shares of Alibaba are set to rise, perhaps by 22% or more in 2018, given the stocks expected earnings growth rates of about 28% in fiscal 2020. (For more, see also: Is It Too Late to Buy Alibaba Stock?)
Technicals Suggest a Bottom
From a technical standpoint, shares are showing signs of bottoming. Since mid-August the relative strength index (RSI) had been trending lower, while the stock's price had been rising, a divergence, which was suggesting the stock price had gotten ahead of itself. However, that RSI reading appears to now be turning higher, a positive indication. Additionally, during the recent downdraft, volume had increased to higher than normal levels but has been steadily declining, while the stock has found a technical support level around $170, again signaling the stock may have put in a bottom.
Strong Fundamentals
There is no doubt that Alibaba is growing with earnings which are expected to rise by about 51% in 2018, nearly 30% in 2019, and about 28% in 2020. But yet, the market only values shares of Alibaba at about 21 times 2020 earnings estimates, giving the stock a growth adjusted PEG ratio of approximately 0.77. According to the Dow Jones S&P Indices, the information technology sector trades at 18.7 times 2018 operating earnings estimates, and a PEG ratio of 1.36, based on a 5-year expected growth rate of about 14%.
About $210
Before its monster run in 2017, the last time Alibaba peaked was in November 2014, after the stock first came public in the U.S., the company traded at nearly 30 times 2-year forward earnings. Giving a discount to that multiple, at 25 times 2020 earnings estimates, the stock price comes to a price per shares of about $210, which would give the stock a PEG ratio of just 0.93—still cheap when adjusted for growth, but just about equal to the earnings growth rate. It shows how much room shares of Alibaba could have to run should the company continue to drive earnings growth. It seems unlikely that shares of Alibaba would trade a multiple above its historical high, given the company is based out of China and the potential risk that could carry. (For more, see also: Alibaba May See Unprecedented Growth: Wells Fargo.)
BABA Chart
BABA data by YCharts
With a strong fundamental setup driven by meaningful earnings growth over the next couple of years, and a technical setup indicating a potential bottom, Alibaba may be set to have another solid 2018 after a stellar 2017.
Recent BABA News
- Alibaba Group Will Announce March Quarter 2024 and Full Fiscal Year 2024 Results on May 14, 2024 • Business Wire • 04/30/2024 09:00:00 AM
- Alibaba.com Unveils Affordable, Customizable Logistics Solutions for U.S. SMEs • PR Newswire (US) • 04/17/2024 02:00:00 PM
- Delta Generates US$37 Million Profit in Q1, Google and Intel Unveil Cutting-Edge AI Chips, and More News • IH Market News • 04/10/2024 11:13:48 AM
- Boeing Down in Pre-Market Due to CEO Developments and Denver Incident; MicroStrategy Surges 11% with BTC Spike, and More • IH Market News • 04/08/2024 11:17:49 AM
- Cal-Maine Surges on Strong Quarterly Performance, Taiwan Earthquake Disrupts Tech Supply Chain, and More • IH Market News • 04/03/2024 11:12:20 AM
- Walgreens Slashes Annual Profit Forecast; MillerKnoll Nosedives 17% on Bleak 4Q Outlook, and Latest News • IH Market News • 03/28/2024 01:48:04 PM
- AliExpress becomes the first exclusive e-commerce partner of UEFA EURO 2024™ • PR Newswire (US) • 03/27/2024 02:35:00 PM
- AliExpress becomes the first exclusive e-commerce partner of UEFA EURO 2024™ • PR Newswire (Canada) • 03/27/2024 02:16:00 PM
- AliExpress becomes the first exclusive e-commerce partner of UEFA EURO 2024™ • PR Newswire (US) • 03/27/2024 02:16:00 PM
- Alibaba Group Cainiao IPO Update and Share Purchase Offer Conference Call • Business Wire • 03/26/2024 10:40:00 AM
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- FedEx Soars 13% with Profits Above Forecasts, Nike Hit by China Slowdown, and Latest News • IH Market News • 03/22/2024 01:07:53 PM
- Alibaba.com Witnesses Notable Increase in U.S.-Based SME Buyers During Its Annual March Expo • PR Newswire (US) • 03/21/2024 02:00:00 PM
- Apple Pre-Market Drop Due to Antitrust Threats, Surprising Profit Boosts Micron Shares, and Latest Market Updates • IH Market News • 03/21/2024 11:17:26 AM
- Alibaba.com Records Strong Growth in the Number of UK SME Buyers at This Year's March Expo • PR Newswire (US) • 03/21/2024 09:30:00 AM
- Unilever Initiates Ice Cream Division Spin-Off and Announces Job Cuts; Berkshire Ramps Up Share Buyback Efforts, and More • IH Market News • 03/19/2024 11:33:10 AM
- AliExpress Levels Up Experience for U.S. Customers with Updated Shopping Guarantees and a Redesigned Mobile App • PR Newswire (US) • 03/18/2024 02:49:00 PM
- Apple & Google in Talks for Gemini AI on iPhone, Nvidia’s GTC Conference Today, and Latest News • IH Market News • 03/18/2024 11:10:46 AM
- Adobe Stock Drops Following Below-Estimate Projections, Cardlytics Surges with Unexpected Profit, and More News • IH Market News • 03/15/2024 11:30:55 AM
- Sam Altman Rejoins OpenAI Board; Coinbase, MicroStrategy Surge Pre-Market Amidst Bitcoin’s Latest Milestone • IH Market News • 03/11/2024 10:39:03 AM
- CNOOC Oil Field Discovery in South China Sea, Grifols Surges 18% After KPMG Approval, and Latest News • IH Market News • 03/08/2024 11:19:59 AM
- Alibaba Releases Report on Cross-Border Trade's Positive Impact on the U.S. Economy • PR Newswire (US) • 03/06/2024 11:00:00 AM
- Alibaba.com's Annual March Expo Highlights Small Business Sourcing Trends and Rolls Out More Guaranteed Services • PR Newswire (US) • 02/29/2024 03:29:00 PM
- AliExpress Marks Choice Anniversary with Deals and New Ambassadors • PR Newswire (US) • 02/29/2024 08:07:00 AM
- AliExpress Marks Choice Anniversary with Deals and New Ambassadors • PR Newswire (US) • 02/29/2024 08:01:00 AM
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ILUS Files Form 10-K and Provides Shareholder Update • ILUS • May 2, 2024 8:52 AM
Avant Technologies Names New CEO Following Acquisition of Healthcare Technology and Data Integration Firm • AVAI • May 2, 2024 8:00 AM
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Hydromer, Inc. Reports Preliminary Unaudited Financial Results for First Quarter 2024 • HYDI • Apr 29, 2024 9:10 AM