Alibaba: Upgrade To A Contrarian Buy

Summary:

• Alibaba’s stock has dropped to $85, creating a contrarian buying opportunity due to improved macro data and better price-valuation tradeoff.
• China’s retail sales growth surged to 4.8% in October, benefiting Alibaba’s domestic eCommerce, despite mixed growth in other segments.
• Alibaba’s stock is near oversold levels, making it a bargain with a leading profit multiple of 9.3x and an intrinsic value estimate of $118-$128.
• The risk/reward relationship has improved, justifying a moderate ‘Buy’ rating, contingent on Beijing’s stimulus measures boosting consumer spending.

The stock price of Alibaba Group Holding (NYSE:BABA) (OTCPK:BABAF) has fallen into a short-term down-channel which creates a buying opportunity for contrarian-minded investors, in my view.

Alibaba Group Holding’s stock has consolidated down to

Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, but may initiate a beneficial Long position through a purchase of the stock, or the purchase of call options or similar derivatives in BABA over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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