Record 618 Sales Are a Strong Buy Signal for Alibaba Stock

If you needed any more evidence that Chinese e-commerce powerhouse Alibaba (NYSE:BABA) will be just fine, you got it last week. The company reported record sales from the annual 618 shopping event that wrapped up last week. This helps secure the strength of Alibiaba stock moving forward.

Record 618 Sales Are a Strong Buy Signal for Alibaba Stock
Source: Kevin Chen Photography / Shutterstock.com

The 618 sale is an 18-day shopping spree that concludes, of course, on June 18. It was actually started by rival JD.com (NASDAQ:JD) to counter Alibaba’s Singles Day event held annually on Nov. 11.

But rather than keep to themselves, both companies now celebrate both dates with big promotions. It’s a big winner all the way around, both for those two stocks and for customers.

And in regard to this month, the 618 shopping event was a winner for anyone who holds Alibaba stock and is hoping for bullish trends headed into the second half of the year.

Record Sales Bode Well for Alibaba Stock

Both Alibaba and JD say they raked in record sales for this year’s 618 event, totaling $136 billion. That’s an increase of about 33% from the previous year.

Of that total, Alibaba scored the lion’s share of the profit, bringing in $98 billion versus JD’s $38 billion.

To add some perspective, the post-Thanksgiving sales in the U.S. on Black Friday and Cyber Monday bring in about $16.2 billion. So, BABA and JD knocked it out of the park.

What does that tell us?

First, it’s an indication that the Chinese economy is well on the way back to recovery after the novel coronavirus pandemic. While the U.S. is struggling with an increase in confirmed cases and hospitalizations, China has done a much better job in recent months of stamping out the virus and flattening the curve.

Second, Alibaba’s 618 success shows the continued appeal of e-commerce in a post-coronavirus world. In issuing the earnings for the quarter ending March 31, Alibaba recorded $16.1 billion in revenue, which is a 22% increase over the previous year. Adjusted earnings were $1.30 which was a 7% increase.

Those numbers were largely recorded while China was in lockdown. But now that Beijing has lifted restrictions, online sales are still dominating the Chinese market. The Nikkei Asian Review reports that online sales in China were up 22% in May on a year-over-year basis, while retail sales of consumer goods fell nearly 3%.

That’s why I recently predicted that Alibaba stock is destined to go even higher in the second half of the year.

Alibaba Is Now Listed in Hong Kong

One item for investors to watch is Alibaba joining JD and NetEase (NASDAQ:NTES) in filing new initial public offerings recently in Hong Kong.

The listings are a hedge against the U.S. Congress passing a proposed law that would require Chinese companies to prove that they aren’t owned by the Chinese government. They would also be required to open their books to the Public Company Accounting Oversight Board.

Alibaba, which had its IPO in the U.S. five years ago, was actually going to launch its IPO in Hong Kong last year but postponed the notion because of civil unrest in the area.

It issued 500 million shares and an over-allotment of 75 million shares, raising $13.8 billion.

While total shares were diluted about 3% in the offering, I don’t expect the Hong Kong shares to have an impact on Alibaba’s U.S. shares going forward. First, I’m skeptical that Alibaba would be impacted considering the holding company is headquartered in the Cayman Islands and not China.

But even if it falls under the Holding Foreign Companies Accountable Act, CFO Maggie Wu has said the company is confident in its accounting standards.

The Bottom Line on Alibaba

If anything, the company’s performance in the 618 shopping event makes me even more confident that Alibaba stock is a strong growth pick for the remainder of 2020.

The company pairs e-commerce strength with a growing investment in cloud computing, which has helped it become the fourth-largest cloud company in the world. It’s no wonder why people consider Alibaba to be the “Amazon of China.”

Alibaba stock continues to carry a buy rating in my Portfolio Grader, where it has a ‘B’ grade right now.

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. 


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