The Zacks Analyst Blog Highlights: Alibaba and Amazon
For Immediate Release
Chicago, IL – August 24, 2020 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include Alibaba BABA and Amazon AMZN.
Here are highlights from Friday’s Analyst Blog:
Post-Earnings Alibaba (BABA) Opportunity
Alibaba once again surpasses analyst's lofty expectations in its June quarter earnings. The Amazon of the East continues to prove itself as the tech engine driving China's rapidly digitalizing economy, yet its valuation remains reasonable. It could be an excellent time to invest in Alibaba.
China has been the first major global economy to experience economic recovery from the devastating coronavirus. China reported that it grew its GDP by over 11% in Q2 from the first three months of the year and 3.2% from the same quarter last year.
China appears to be on track for a strong recovery in the second half of 2020 (to the extent these growth figures can be trusted), and its stocks are beginning to look ripe for the picking.
The hottest and most promising enterprise that China has to offer is Alibaba. Its digital leadership and current valuation make BABA an extremely attractive purchase today.
Alibaba is leading the proliferating digital revolution in Asia. Alibaba controls the e-commerce space (80% market share) and its cloud-computing category (roughly 50% market share) of the most populous and soon-to-be largest economy in the world. The pandemic has only strengthened its grip on the nascent online economy in Asia.
COVID-19 has forced the world to rely on digital platforms more than ever. The pandemic provided Alibaba with a massive tailwind, and the tremendous quarterly report yesterday illustrated this.
Alibaba demonstrated revenue growth of 34% year-over-year, with its cloud segment expanding by a massive 59% from the year prior. Alibaba Cloud continues to see robust growth through this pandemic as the necessity to work and learn from home increases enormously.
China's developing economy is digitalizing at a much more prolific rate than the US. The rapidly developing economy is providing enterprises like Alibaba a much larger runway to grow out its digital market, not to mention the ripe opportunities in the surrounding developing regions (aka South East Asia, and India).
BABA is beginning to break out like its western cohorts, and I am continuing to load up on dips, just waiting for its inevitable rally to the stratosphere.
Valuation & Opportunity
The fact that the Amazon of the East has not taken off to the same extent as its western counterpart is baffling to me. Alibaba is valued at less than half of Amazon's market cap despite producing substantially wider margins, illustrating more robust profitability, and having a sizably larger topline growth outlook for the next few years.
BABA has only appreciated 21% this year so far compared to the 73% expansion that AMZN has seen. BABA is trading at a reasonable forward P/E of 33x compared to the e-com industry average of 55x. BABA is about breakout past the roughly $270 level (which you can see below in red) and has a lot more room to run.
BABA is a buy today, and 14 out of 14 analysts agree. I personally think these shares could easily blow past $300 and head towards the valuation it is worth. I would not hesitate to start a position in this revolutionary tech enterprise if you can stomach any potential short-term volatility.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2021.
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