Stock Market Correction Means China Stocks Are On Sale
When markets experience a correction, opportunity rises and Alibaba Group Holding Ltd (NYSE:BABA) stock is the big-cap Chinese online retailer that’s now in the zone for speculative investors.
Alibaba is the Cayman Islands-registered powerhouse Internet retailer in the Greater China Region. It listed not too long ago on the New York Stock Exchange to much fanfare.
The correction, both in Chinese and U.S. equities, has given BABA stock a big haircut. This is an opportunity now for the speculative investor. While Alibaba stock is a 100% risk-capital opportunity, speculative investors/traders should now have this position on their radar.
In its recent quarter (ended December 31, 2015), Alibaba said that it now has over 400 million annual active buyers using its web sites. This in itself is an enormous marker.
The company’s stock chart is featured below:
Chart courtesy of www.StockCharts.com
Sales in its most recent quarter improved 32% comparatively to $5.3 billion, or in renminbi, China’s national currency, RMB 34,543. In terms of the total value of all products and services sold during the quarter, the gross amount among Alibaba’s Chinese retail marketplaces grew 23% to $149 billion.
According to the company, the “Singles Day” shopping extravaganza in China is now the biggest shopping day in the world. Alibaba processed 467 million delivery orders during the Singles Day 24-hour period. Peak transactions were 140,000 per second at one point.
Quarterly earnings grew 108% to $1.9 billion, or 114% to $0.76 in diluted earnings per American depositary share (both metrics include a one-time gain).
So basically, Alibaba stock is the Greater China Region’s Amazon.com, Inc. (NASDAQ:AMZN), which in itself is something to be very aware of.
Established Chinese companies are typically profitable, much more than Western corporations. Naturally, there are country-specific investment risks inherent with any U.S.-listed Chinese stock. Because of a multitude of risks, not the least of which is the RMB/USD exchange rate, all Chinese equities should be considered speculative.
But Alibaba stock has serious operational momentum and the company is expanding into a multitude of businesses. The company is now in the grocery business with a growing number of cities offering same-day delivery.
And its recent initial public offering means the company is now well financed and Alibaba shouldn’t need to tap the stock market again for a while.
The company’s year-end 2015 cash balance was approximately $18.3 billion. Total employee count was 36,465.
Wall Street’s earnings estimates for Alibaba continue to tick higher for upcoming periods.
Being a $150-billion company, a number of investment banks follow the stock. But this institutional interest is very important—and useful.
Alibaba stock is down but the business is still growing by leaps and bounds. It shouldn’t be too much longer before the position forms a solid bottom.
When the broader market experiences correction, it’s a great time to review two things: 1) your portfolio’s overall risk exposure, and 2) great companies that are now on sale. If you’re an equity market speculator, BABA stock is definitely worth having on your radar now.