Could BABA Stock Be Worth More Than Amazon.com by 2020?
The Chinese e-commerce equivalent of Amazon.com, Alibaba Group Holding Limited (NYSE:BABA), broke its all-time record for Singles’ Day sales only to see BABA stock tumble by more than three percent in Wednesday’s trading. The market’s irrational reaction to the positive news begs one question: are you on the right side of the trade?
Here’s why I’m bullish on BABA stock in 2016.
This Could Be Huge for BABA Stock
Touted as the Chinese anti-Valentine’s Day, Singles’ Day was created for Chinese singles to celebrate their “singledom.” However, today, Singles’ Day is celebrated by all in the most populous country in the world as a day to shop, hopping online to get the biggest discounts of the year. The equivalent of America’s Cyber Monday, Singles’ Day pulls in the highest volume of online sales. The pioneer and leader of Singles’ Day is none other than Alibaba.
In one day alone, Alibaba has set new records by outdoing itself. The company sold more than $14.3 billion in merchandise through its web site in just 24 hours, which is an approximately 54% increase from last year’s $9.3 billion in sales.
The company has not only confirmed its dominance in the country’s online market, but it has also rejuvenated hopes in the Chinese economy. The strong buying activity, as evident from the numbers reported by Alibaba, has refuted the China bears, who were citing economic slowdown for the wariness of the Chinese stock market. I wouldn’t be surprised if Alibaba is able to double its Singles’ Day sales number in the next two years.
The Chinese e-commerce giant has recently acquired some of the biggest Chinese companies and holds diversified investments in various sectors. To call it an e-commerce company alone doesn’t do justice to its full scope of business. From video streaming to filmmaking, from e-commerce to brick-and-mortar retail sales, and from mobile investments to payment solutions, Alibaba has been expanding its scope beyond its core e-commerce business for years. We wouldn’t be wrong in calling it the biggest Chinese conglomerate in the Internet services space.
BABA stock’s current trading level, which is its initial public offering (IPO) price despite the company posting stellar earnings in the latest quarter, is completely unwarranted. Technically, I see an uptrend setting in for BABA stock. The stock has started building momentum in the last month, after hitting its all-time lows in September, and is now riding above its 50- and 200-day moving averages.
Chart courtesy of www.StockCharts.com
Bottom Line for BABA Stock
Alibaba is a cash-flow-positive company and has been returning profits to shareholders, unlike its American counterpart Amazon. The company has proven that the fears over Chinese economic slowdown are wrong, or at least they are so far. In the local scene, Alibaba’s growth and revenue stream far outpace those of its next big competitor, JD.com, Inc. (NASDAQ:JD). With its massive expansion underway, Alibaba could soon be valued at a ratio close to Amazon’s, if not more.
The bottom line: I see great upside for BABA stock.