Alibaba Group Holding Ltd (NYSE:BABA) had its brief moment in the sun at the end of 2014, when shares briefly peaked at over $115 a share after a successful initial public offering. However, the intervening year-and-a-half hasn’t been very kind to BABA stock, with shares trading around $60 as recently as February.
But while things admittedly are disappointing for Alibaba stock investors who bought in at the peak, much of the negativity has been priced in and the Chinese e-commerce giant hasn’t done that much worse than its peers lately.
Consider that since Jan. 1, BABA stock is only off about 3% vs. about a 4% decline for the iShares FTSE/Xinhua China 25 Index (ETF) (NYSEARCA:FXI) that represents China stocks as a group. And, of course, American e-commerce king Amazon.com, Inc.(NASDAQ:AMZN) has seemingly run out of runway, with shares down nearly 20% YTD.
So is the worst over for Alibaba, or will BABA stock continue to suffer under the pressure of high expectations and a slowing Chinese economy?
When you look at the numbers and recent headlines, it seems the former is the most likely.
BABA Stock Looking Up
Investors have a lot to like about Alibaba stock right now, but some of the biggest reasons include momentum for BABA stock in the last few weeks, a bargain valuation and Alibaba Group’s strong story of continued growth.
Let’s explore momentum first: BABA stock is up by more than 17% in the last 30 days — more than twice the S&P 500 and nicely outperforming the roughly 11% added by Chinese equities as measured by the FXI China ETF.
That’s a great run, but more importantly is that performance has not priced new investors out of Alibaba. Valuation metrics are still cheap across the board, with BABA stock boasting a forward P/E of just 3.5! It also looks good when you factor in growth, with Alibaba sporting a price/earnings-to-growth ratio of 1. That indicates that BABA is fairly valued for any industry — but compared to most high-growth tech stocks, that’s downright cheap.
The icing on the cake is that the growth story looks to be going strong despite headwinds in China. Just consider the company’s projected earnings growth of over 20% in FY2016 and projected revenue growth of over 30% as proof that Alibaba is not hurting for opportunity.
And beyond China, BABA stock continues to expand into new markets as evidenced by a report just today that Alibaba is making a big push into India in partnership with Tata Sons. According to the Economic Times of India, Alibaba “has approached Tata Sons for a possible partnership” in India’s online retail market.
As if tapping into the e-commerce potential of China wasn’t enough, a partnership with India’s industrial giant Tata could mean big things for BABA there, too.
It’s also worth noting that Alibaba Group isn’t just content to stick with selling things online, either. As InvestorPlace contributor Chris Fraley recently pointed out, “in November, the company bought out Youku Tudou Inc (ADR) (NYSE:YOKU), which is essentially the YouTube of China, for $4.6 billion.” That makes Alibaba China’s market leader in the country’s booming online video industry.
There’s a lot for investors to like about Alibaba stock right now. So buy with confidence on the momentum that BABA stock has built off its February lows.
Jeff Reeves is the editor of InvestorPlace.com and the author of The Frugal Investor’s Guide to Finding Great Stocks. Write him at editor@investorplace.com or follow him on Twitter via @JeffReevesIP. As of this writing, he did not hold a position in any of the aforementioned securities.
