As far as large-cap technology plays go, most investors immediately gravitate toward U.S. names. Indeed, that makes sense. Some of the world’s largest and most pronounced technology companies are U.S.-based.
However, it’s clear that such a view could result in investors giving up on some serious growth potential over the longer-term.
Chinese technology stocks are starting to catch up in terms of valuation right now. Indeed, in many regards, these companies are ahead of U.S. companies in terms of the quality of their underlying technologies and the size and growth rate the Chinese market provides. The fact that many of these companies still trade at substantial discounts to Western peers in terms of valuation is worth noting, for growth investors.
One such company investors would do well to keep on their radar is Alibaba (BABA). Here’s why this stock could be one of the most underrated growth stories in the mega-cap space right now. (See Alibaba stock charts on TipRanks)
BABA Stock the Winner of China’s “618” Event
Many non-Asian investors may be well aware of seasonal events held by various e-commerce juggernauts such as Amazon (AMZN). Prime Day, for example, is one of the most-watched e-commerce events in the Western world.
In China, Single’s Day in November and the country’s “618” shopping bonanza (an 18-day event held around June 18th) are the key focal points of such investors.
Given Alibaba’s status as the “Amazon of China,” a lot of attention has been paid to this company’s previous blowout revenue numbers from this event. However, this year, it appears Alibaba is choosing not to release its official numbers resulting from this mid-year event.
Why’s that?
Well, Alibaba has been in the purview of Chinese regulators since late last year. A Chinese government crackdown on monopolistic practices taking place at mega-cap companies such as Alibaba led to a $2.8 billion fine, and a lot of reputational damage for Alibaba. Accordingly, it appears the company is trying to keep its stellar results under wraps for now.
According to data from Syntun, Tmall, Alibaba’s dedicated B2C platform, was the leading platform for the Chinese 618 event, beating all other platforms in terms of sales. Alibaba has held this top position for some time. This year, over 250,000 brands were included in this promotion, launching 1.4 million new products. In comparison, rival JD.com (JD) took second place, with a 33% increase in sales over last year.
The fact that JD chose to formally release its numbers while Alibaba chose to stay silent on the issue is telling. It appears Alibaba’s management team is worried about showing numbers that are too strong right now. Many speculate that Alibaba’s blowout numbers from the 618 event could drive more regulatory oversight, which could actually be a good thing for investors.
Indeed, many long-term investors maintain the view that Alibaba is playing shy for a reason. It’s absolutely killing it in terms of growth right now. Accordingly, the company’s 8% share price jump since June 18th (at the time of writing) indicates the market believes this next quarter will show some impressive growth.
What Analysts Are Saying About BABA Stock
According to TipRanks’ analyst rating consensus, BABA stock comes in as a Strong Buy. Out of 26 analyst ratings, there are 25 Buy recommendations and 1 Hold recommendation.
As for price targets, the average Alibaba price target is $301.60. Analyst price targets range from a low of $270.00 per share to a high of $350.00 per share.
Bottom Line
The reality is that Alibaba is in an enviable position right now. This company is producing results that are so good, the company is hesitant to release its own sales data. For long-term investors worried about Alibaba’s growth rate, it appears there’s nothing to fear right now.
Indeed, the fact that Alibaba has claimed that 95% of its orders were delivered the next day is truly impressive. Alibaba’s value as an e-commerce juggernaut in the Chinese market is undeniable, and the company is doing everything in its power to remain number one.
The view that Alibaba’s next quarter results will take this stock on a ride much higher than its current price, holds a lot of water. Long-term investors would do well to consider BABA stock at these levels.
Disclosure: Chris MacDonald held no position in any of the stocks mentioned in this article at the time of publication.
Disclaimer: The information contained herein is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities.
