#2 - Alibaba (NYSE:BABA)
Alibaba (NYSE: BABA) - Although reporting strong 1Q 2019 earnings, Alibaba's stock was punished, closing down nearly 3% after the announcement. Still, the strong volume with which the stock traded after the earnings report lent credence to the idea that investors didn't quite to know what to think about Alibaba.
Alibaba competes in many of the same spaces as Tencent Holdings. But whereas Tencent leads with social media, Alibaba leads with e-commerce. And when we say leads, we really mean leads. It’s fair to say that Alibaba is the Amazon of China. Case in point, if projections are accurate and the Chinese online shopping market reaches a gross merchandising volume (GMV) of $1.57 trillion in 2020, Alibaba stands to capture a share that exceeds $1 trillion.
And that’s just China. Alibaba is making serious overtures into India. In addition to its population and geographic proximity, India represents a largely untapped, but growing, e-commerce market. The market is expected to reach $25 billion by the end of 2018, an increase of over 5% since 2016. By 2022, the market is expected to be in excess of $52 billion. Alibaba isn’t stopping there. As we mentioned above, they are a competitor of Tencent in the areas of cloud computing as well as streaming media.
The fundamentals for Alibaba are strong. Average consensus earnings estimates are for approximately $7.73 per share in the fiscal year 2020. This would have the stock trading at just 22 times forward earnings. It would also be up over 30% from this year’s expected EPS of $5.84. If those projections are accurate, then Alibaba would have a current PEG ratio of just 0.68. When you consider they are the unquestioned market leader and will be for the foreseeable future, their current valuation would make this stock a bargain.
About Alibaba Group
Alibaba Group Holding Limited, through its subsidiaries, provides technology infrastructure and marketing reach to help merchants, brands, retailers, and other businesses to engage with their users and customers in the People's Republic of China and internationally. The company operates through seven segments: China Commerce, International Commerce, Local Consumer Services, Cainiao, Cloud, Digital Media and Entertainment, and Innovation Initiatives and Others.
Read More - Current Price
- $81.26
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 12 Buy Ratings, 3 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $109.96 (35.3% Upside)
