Why Alibaba Stock Is Still A Buy

Fundamentals of BABA still strong as it sails through the turbulent Chinese economy

In September 2014, the world saw the biggest initial public offering in the history. Alibaba Group Holding Ltd. managed to raise almost $25 billion in its IPO. The IPO received wide coverage from the media as the Chinese company was viewed by many as the future e-commerce leader.

The company’s business is still fundamentally strong as it was before but the economic conditions of its home market, China has been giving it a tough time. The turmoil in China is considered as a main reason for its falling share price, which has declined by 4.26% year to date.

The present condition of Chinese economy has concerned many that sales will to be that much high during the Single’s Day on Wednesday November 11, with concerns heightened by competition in the e-commerce industry from JD.Com and other rivals.

With analysts reducing revenue expectations, the stock price reached its all-time low of $57.2. The reduction in expected revenue arrived at a crucial time for the e-commerce giant when the market was facing a number of bearish viewpoints. ; On average the volume has fell by 37.21%. Compared to Alibaba stock decline of over 28% in the quarter, the Standard & Poor 500 index has declined more than 85.

The most important point is that the falling stock price is not because of the weak fundamentals, but it’s due to falling demand. This has convinced some of the analysts that the upcoming quarter sales will fall further.  Another problem is the increasing competition in the e-commerce market.

With rivals such as Baidu Inc, JD.Com and Tencent Holdings setting their position in China, Alibaba share is continuously declining, while its share price have dropped approximately by 4% year to date, however its rival Tencent and JD.Com stock have increased by 15% and 13% during the same period.

Alibaba stock news reveals that at the moment, most of the analysts are confident on Baba stock. Out of 51 analysts, 44 gave it a Buy, 5 suggests a Hold while 9 gave it a Sell rating. The twelve month stock price target stands at $91.55.

It can be said that the company is evaluated in the market based on sentiments instead of fundamentals, which raises the chance of the stock going down in the upcoming period. However, it seems like in long term, the strong fundamentals of company will attract investment.  

Alibaba stock is up 7.42% to $63.24 during pre-market trading today.