BABA Stock an Aggressive Long-Term Hold After Earnings

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Alibaba Group Holding Ltd (NYSE:BABA) is a company that I’ve liked since it debuted on the U.S. stock market as the largest public offering in history back in September. Many investors were asking me what I thought of the Chinese e-commerce giant, and I recommended it as a great play on the Chinese economy.

alibaba stock ipo baba stockBABA stock has now been public for more than eight months, and in that time it has been a favorite of many traders — including myself. More than 19 million shares change hands each day on average, and they have moved as high as $120 and as low as $77.77 just a few weeks ago.

The company reported fiscal fourth-quarter earnings before the open on May 7, and BABA stock skyrocketed out of their depressed levels the following day. I was cautious ahead of earnings, because of some of the buzz surrounding the company and the uncertainty of earnings season overall, but I’ve always viewed BABA as a great long-term opportunity, and I continue to feel that way.

Alibaba is China’s Amazon.com, Inc. (NASDAQ:AMZN). It’s an e-commerce giant that is changing the way people shop for and purchase goods. But not only does the company cater to Chinese citizens, it also sells to millions of buyers and suppliers all around the world — more than 190 countries and regions, in fact.

BABA Stock Still the Best Chinese Consumer Play

Prior to BABA’s debut on the U.S. market, there was no way for American traders to play China’s emerging consumer market. This in and of itself made BABA stock worth looking at when it finally made its debut, and was actually my main reason behind recommending it as a great opportunity.

It’s true that BABA is a more aggressive play, but if you’re an investor who’s comfortable undertaking this level of risk, I believe the payoff will be more than worth it in the longer term.

BABA stock had struggled prior to its quarterly report due to comments from the company’s founder and executive chairman, Jack Ma, that there may be a hiring freeze sometime this year. Alibaba had also been dealing with fraud allegations, as the Chinese government stated that fake goods were being sold on the platform. The stock plunged to a new all-time low on May 5.

However, when the quarterly results hit the market before the bell on May 7, BABA surged. Revenue increased 45% year-over-year to $2.8 billion, which beat expectations on the Street for revenue of just $2.6 billion. And while earnings actually declined in the quarter to 48 cents per share, the results were still better than estimates of 42 cents. BABA also experienced a 40% increase in the amount of merchandise sold and saw a 37% increase in active buyers.

Along with the strong results, management also announced that current Chief Operating Officer (COO) Daniel Zhang would take over as chief executive officer (CEO) effective the following weekend. Zhang would be replacing Jonathan Lu, who would then take over as vice chairman.

The stock popped more than 7% the following day, at one point climbing as high as $89.29. While Alibaba stock has pulled back a bit since the report as some traders are likely taking profits, I continue to see BABA stock as a good long-term opportunity.

Hilary Kramer is the editor of GameChangers and Breakout Stocks Under $10.

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