Nothing Can Stop Alibaba Stock From Going Higher Now

Alibaba (NYSE:BABA) is one of those rare stocks that can pretty much take anything that’s thrown at it and come out ahead. Despite 2020’s best efforts to beat down the market, Alibaba stock is trending in positive territory.

baba stock

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I doubt there’s much that can stop BABA from forging higher for the rest of the year. Just consider what has happened so far.

Chinese stocks as a whole were battered by the ongoing trade war between Washington and Beijing. Tariffs between the two powers began back in 2018, and many are still in effect. That’s despite the signing of a phase-one trade deal in January.

Then came the novel coronavirus, which emerged in China’s Wuhan. With 6.9 million confirmed cases and over 400,000 deaths globally, Covid-19 threatens to put the global economy into a recession.

And now there’s a threat that Alibaba stock could be delisted in the U.S.

But despite all those headwinds, Alibaba is up more than 3% year to date. And it’s destined to move even higher.

Delisting Threat Is Just Another Hurdle

The most recent challenge Alibaba is facing right now, at least in the U.S. stock market, is a move in Congress to delist Alibaba from the New York Stock Exchange.

The Holding Foreign Companies Accountable Act would require any company listed on U.S. exchanges to certify that it is not controlled or owned by a foreign government. Companies also must submit to inspection by the Public Company Accounting Oversight Board. Failure to do so for three consecutive years could lead to delisting.

This election-year effort is a result of simmering tensions with China — brought on by the trade war. It’s also a result of the pandemic and scandals like that of Luckin Coffee (NASDAQ:LK). Luckin faces a delisting from the Nasdaq Exchange after the company falsified $310 million in sales in 2019.

The company was founded less than three years ago with deeply discounted prices to compete with U.S. rival Starbucks (NASDAQ:SBUX).

The Senate already passed the bill, and the Democrat-led House of Representatives has introduced a companion bill. From Rep. Brad Sherman:

“As we continue to experience the economic fallout and volatility caused by the COVID-19 pandemic, the need to protect main street investors is all the more important. For too long, Chinese companies have disregarded U.S. reporting standards, misleading our investors.”

It remains unclear how a delisting, even if the bill passes Congress, would affect Alibaba. BABA stock actually represents shares of Alibaba Group Holding, which is headquartered in the Cayman Islands, not China.

And CFO Maggie Wu has said Alibaba is happy to stand by its accounting standards and hold it up to scrutiny.

Given all that, I don’t expect the delisting threat to hurt Alibaba stock.

Alibaba Earnings Were Solid

In May, Alibaba reported fiscal fourth-quarter earnings of 114.3 billion yuan ($16.2 billion), beating Wall Street’s estimates of 108.4 billion yuan. Earnings per share were 9.2 yuan, which beat analysts’ estimates of 6.2 yuan.

That’s a solid number for the e-commerce giant, considering how the coronavirus pandemic affected the period. BABA reported a total annual active consumer base of 960 million people, who bought more than $1 trillion in merchandise.

Guidance for fiscal 2021 is for revenue greater than 650 billion yuan, which is slightly below analysts’ expectations of 664.3 billion yuan.

I’m bullish on Alibaba’s 2021 forecast, too. As is the case for Amazon (NASDAQ:AMZN) in the U.S., the global pandemic is changing a lot of peoples’ shopping habits from brick-and-mortar stores to e-commerce. Alibaba is already benefiting from that trend, with year-over-year revenue growth of 22% in the most recent quarter.

And don’t forget, Alibaba is making a huge investment in cloud computing, putting another $28 billion into its cloud infrastructure over the next three years. Alibaba is already the fourth-largest cloud company in the world, and it’s the fastest-growing.

The Bottom Line on Alibaba Stock

Nothing that’s happened in recent weeks makes me doubt Alibaba. In fact, my ratings on BABA are just getting better.

I recommended to you in May that Alibaba was a great stock to buy on the dip, and then I went a step further by naming the company as one of the six best stocks you can buy for a post-coronavirus bump. Both of those articles were written when BABA was a B-rated stock in my Portfolio Grader.

Since then, the Alibaba case has just grown stronger. Now I’m giving Alibaba stock a strong buy rating, and I have upgraded it to an A.

Louis Navellier had an unconventional start, as a grad student who accidentally built a market-beating stock system — with returns rivaling even Warren Buffett. In his latest feat, Louis discovered the “Master Key” to profiting from the biggest tech revolution of this (or any) generation. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.


Article printed from InvestorPlace Media, https://investorplace.com/2020/06/nothing-can-stop-alibaba-stock-from-going-higher-now/.

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