Alibaba Group Holding Ltd (NYSE:BABA) is up 102% for the past 12 months, even with its dip in December, which it recovered from in short order once the New Year was rung in. The selloff in BABA stock during December could have been for a number of reasons, but none of them were that the company is getting too far ahead of itself.
On the contrary, when you look at its performance since it went public in late September 2014, it’s up a total of 94%. That means its recent 12 month run has it outperforming its long-term growth.
Remember, BABA stock has a $467 billion market cap, and even after its huge run, it’s still trading at a price-to-earnings ratio of 50.
The company it most resembles in the U.S. is Amazon.com, Inc. (NASDAQ:AMZN) because of its diverse portfolio of ecommerce-driven businesses. For comparison, AMZN stock sports a slightly larger market cap ($578 billion), but its 12-month performance is a hair under 60% and it’s trading at a P/E of a whopping 302.
This is important to put into your equation if you’re looking for blue-chip ecommerce companies. Since most investors are familiar with AMZN, they find buying the stock much better than buying a similar company with great growth prospects and a much better valuation, simply because the other company is Chinese.
This is when U.S.-centric investing can hurt your portfolio rather than help it. Not only is China a much bigger market than the U.S., but, like AMZN head Jeff Bezos, CEO and founder of BABA Jack Ma is always looking for growth opportunities. And right next door to China (the most populous country on Earth), is India, the second most populous country on the planet.
While the two countries haven’t always seen eye-to-eye politically, economics is knocking down those political barriers.
For example, in 2016, BABA bought a gaming company, AGTech Holdings for about $300 million. Last year, BABA spent a lot of time molding this online gaming firm into its own competitive spear.
Along with the coup of landing a 5-year contract to run an online and offline operating license for Guan Dan Poker for a cash prize, it is also making significant inroads into the Indian market with a joint venture with India’s mobile games and entertainment player PayTM Group.
Guan Dan Poker is played by more than 150 million Chinese and this is the only online game that offers a cash prize, plus the right to be come a certified ‘Master’ and travel outside China to tournaments.
Its JV with PayTM group will give AGTech exposure to 200 million gamers in India, one of the fastest growing online gaming markets in the world.
The point is, don’t let BABA stock’s December performance or the recent news that the U.S. nixed a deal between BABA subsidiary Ant Financial and U.S.-based Moneygram International Inc (NASDAQ:MGI) scare you away. There’s a lot of value and growth locked up in BABA stock for many years to come.
Louis Navellier is a renowned growth investor. He is the editor of five investing newsletters: Blue Chip Growth, Emerging Growth, Ultimate Growth, Family Trust and Platinum Growth. His most popular service, Blue Chip Growth, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.
