As a bet on the growth of international e-commerce, Alibaba (NYSE:BABA) has rewarded long-term shareholders handsomely. Even with on-and-off trade tensions and the spread of the novel coronavirus, Alibaba stock remains near its 52-week high.
Contrarian investors now have to weigh the data against the price of Alibaba stock. And the price is by no means cheap. This could present an internal conflict as the company remains a seemingly unstoppable e-commerce juggernaut.
The best way to resolve this conflict is to learn as much as you can about Alibaba’s fiscal performance along with the company’s proactive measures to stay ahead of the competition. You’ll most likely be fully convinced that Alibaba stock is well worth the lofty price tag.
A Closer Look at Alibaba Stock
Alibaba stock bears could conceivably construct an argument that the price run-up from October of 2019 to January of this year was too much, too fast. In hindsight, the powerful surge from $162 to $230 wasn’t meant to last.
Thus, the coronavirus was the pin that popped that bubble. In March, the Alibaba share price was as low as the $176 area. However, China’s economic recovery took place sooner than it did in some other regions of the world. That recovery appears to have bolstered the Alibaba stock price.
Today, traders must consider whether they want to own the shares at a price that’s close to where it was during the January peak. The momentum is clearly to the upside, but value investors might be reluctant to buy a pricey stock.
An examination of the data may convince the skeptics to hold their noses and pick up some shares regardless of the high price.
Alibaba’s Record Sales
Even if a stock is expensive, this could be justified if the company has robust sales. Alibaba’s trailing 12-month price-to-earnings ratio of 63.09 might make value investors shudder. Yet, they should check out Alibaba’s sales figures before dismissing the stock as overvalued.
First, let’s provide a bit of background information. One major annual shopping day in China’s retail sector is Singles Day. That event is celebrated on November 11 and was actually created by Alibaba.
Some folks would consider China’s Singles Day to be even bigger and more significant than America’s Black Friday. This may or may not be the case, but serious Alibaba investors will certainly want to pay attention to the sales numbers for Singles Day.
As measured in terms of gross merchandise value, or GMV, Alibaba raked in an astonishing 268.4 billion yuan, a record amount. This happened prior to the peak of the coronavirus pandemic, but it’s an impressive number nonetheless.
The Growth Continues
Another major shopping day in China is known simply as 618. That’s because it’s celebrated on June 18. This year, Alibaba’s 618 sales data was closely watched by traders as a gauge of China’s recovery from the pandemic.
On this important day, Alibaba’s GMV came to a truly remarkable 698.2 billion yuan. That’s more than twice as much as Alibaba’s GMV haul from Singles Day. To provide a reference point, it would translate to approximately $98.52 billion in U.S. dollars.
But even with Alibaba continuing to prove itself as an e-commerce giant, the company is still ambitiously expanding its cloud segment. This is a bold move and it proves that Alibaba, despite its winning track record, it’s content to just sit on its laurels.
Just recently, Alibaba announced its intention to augment the company’s global cloud unit by 5,000 employees during the current financial year. Before you know it, Alibaba could be just as world-famous as a cloud computing company as an online shopping hub.
The Bottom Line on Alibaba Stock
The reality of the situation is that Alibaba’s blockbuster success as a company could easily justify the company’s share price. Therefore, even value-focused investors can relax and pick up some shares of Alibaba stock at the current price point.
As of this writing, David Moadel did not hold a position in any of the aforementioned securities.
