The trade war between the U.S. and China has dragged on for more than a year and has claimed plenty of victims as traders succeed — and often fail — in trying to time the markets. Indeed, some investors in Alibaba (NYSE:BABA) stock have lost capital by selling their shares whenever the tariff-war tension ramps up. To me, that’s not a winning strategy in the markets. As I’ll soon explain, Alibaba Group is a solid investment and there’s no need to dump your Alibaba stock shares at every little trade-war scare.
In reality, your best bet is probably to hold on through thick and thin, and possibly even add a few more shares when the price dips.
BABA Stock, By the Numbers
Wherever you look, you’re very likely to find positive data surrounding Alibaba even amid a heated trade war. For one thing, Alibaba Group’s most recently reported quarterly revenues should impress any current or prospective shareholder. In fact, the company announced a whopping 42% year-over-year increase in its revenues, and Alibaba’s total revenues were revealed to be 20% greater than they were in the previous quarter. Particular highlights included a 44% revenue expansion in Alibaba’s e-commerce business, as well as a massive 66% increase in the company’s cloud services business.
Furthermore, when it comes to cash flow and enhanced shareholder value, it’s hard to beat Alibaba. The company can boast an impressive $4.73 yield in earnings-per-share over the past year, which makes any debate surround the BABA stock price almost irrelevant because the shares could essentially be considered a bargain at any price (within reason, of course).
All told, Alibaba Group grew its annual revenues from 2017 to 2019 by 56% on average, indicating that the ongoing tariff battle between the U.S. and China can’t stop a good company from enhancing its bottom line. I’m expecting this growth trajectory to continue, as Alibaba serves 860 million customers and is targeting 1 billion customers for FY 2024. And I think they’re even selling themselves short with that figure.
The Damage Is Done, But Alibaba Group Will Survive
Suffice it to say that BABA stock holders need not be concerned about Alibaba Group’s profitability, as the aforementioned numbers indicate a bright future for the company as well as the shareholders. The macro environment, however, has some BABA stock investors worried about trade concerns taking a toll on the share price.
Now, it cannot be denied that the tariff war must be taken into account in today’s investing landscape. Indeed, research conducted by Iowa State University’s Minghao Li, Edward J. Balistreri and Wendong Zhang found that as of September, U.S. exports to major trade partners in China, Canada, Mexico and the European Union have declined; the steepest decline has been in American exports to China, which fell “by 6.4% under the tariffs accumulated as of September 2019.”
Of course, China’s exports have declined as well, and Alibaba stock investors need to watch the ongoing developments in the international trade dispute carefully. Still, China is surviving and possibly even thriving during these challenging times, as the nation’s GDP growth forecast for 2019 is 6.1% — a strong number compared to other developed nations, including the United States.
The Takeaway on Alibaba Stock
No trade war in history has lasted forever, and while they’re concerning in the moment, a long-term outlook can help investors ride out the turbulence. As for BABA stock, there will be whipsaws but Alibaba Group remains strong and shareholders can rest assured that patience will pay off, trade war or no trade war.
As of this writing, David Moadel did not hold a position in any of the aforementioned securities.
