It seems that investors’ concerns are beginning to ease around Alibaba (NYSE:BABA) stock. After the long, tumultuous downturn it appears that pressure is beginning to abate.
That’s very good news for the Chinese tech giant that was among the worst suffering as a regulatory crackdown simmered along. That regulatory crackdown hasn’t exactly abated.
However, it is the power of authoritative words that has many beginning to see a light at the end of the tunnel for Alibaba.
Powell Eases Concerns
When Federal Reserve Chair Jerome Powell appeared before the Senate for a hearing about his nomination for a second term his confident words had a ripple effect.
Specifically, his confidence in the U.S. economy and a message that the Fed would curb inflation seemed to resonate. His words led investors to believe that much faster rate hikes would likely not materialize as some had earlier speculated.
In effect, that took pressure off of tech stocks which had suffered when December inflation numbers came out. That was a positive for Alibaba as a tech stock.
That signals that some sort of bottom may have been reached in relation to Chinese tech. A look at Alibaba’s price chart shows that it has held relatively steady at the same low range since the beginning of December.
It isn’t definitive evidence that BABA won’t go lower, but it is a reasonably logical conclusion to make.
Valuation Argument Gaining Traction
Pundits have been arguing that Alibaba is a stock to pick up because it remains undervalued. That’s the precise argument that U.S. Tiger Securities analyst Bo Pei echoed in a recent comment to Barron’s. Regarding Alibaba and JD.com (NASDAQ:JD) he said: “Valuation is definitely one of the reasons,” and that: “Both are meaningfully cheaper than U.S. peers such as Amazon.”
That statement might frustrate some readers who have long been beating that drum. Anyway, the point is that the sentiment seems to be taking root amongst analysts and resonating with investors to some degree.
Again, that is reflected in the price chart for Alibaba as its downward slide may finally have, mostly, abated. Alibaba’s resurgence is going to be about a qualitative shift. It’s all about signals from the market and interpreting them.
Other influential names are signaling that the worst may be behind Alibaba as well.
UBS Upbeat About BABA Stock
Back in November UBS Group’s (NYSE:UBS) Global Wealth Management division went so far as to state that the worst of the Chinese tech rout was potentially over at that time.
The Global Wealth Management team noted that the market was pricing in a lot of negatives and made reference to an overcorrection being at hand. That’s essentially what many contrarians have long been saying.
The UBS team also notes that it anticipates 15 – 20% profit growth from the Chinese tech sector in the next two to three years. For its part, Alibaba is expected to see $135 billion in revenues this year and $156 billion in 2023. That equates to 15% growth by revenue, not profits, but it is still largely in line with UBS’ notions.
What To Do With BABA Stock
There is a lot of emotion surrounding any investment into Alibaba. It is a case of attempting to time the market based on feeling.
That’s generally a losing proposition.
However, take confidence in the authoritative voices behind it. Remember, Charlie Munger doubled his stake in Alibaba in the fourth quarter through the Daily Journal (NASDAQ:DJCO). That company’s portfolio only has five positions in total. So, it’s saying something that Munger sees the value in BABA at these prices. Analysts are on board with the idea, large banks are on board with the idea. Those are the voices that can change the tide.
On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Alex Sirois is a freelance contributor to InvestorPlace whose personal stock investing style is focused on long-term, buy-and-hold, wealth-building stock picks. Having worked in several industries from e-commerce to translation to education and utilizing his MBA from George Washington University, he brings a diverse set of skills through which he filters his writing.
