The stock price chart isn't looking good. Alibaba (NYSE:BABA), no matter which way you look at it. Year-to-date, the stock is already down 10%, and going back 12 months, the stock is down 39%. What is the 3 year chart? A disastrous 72% decrease.
But does that reflect a permanent decline in the company? Not necessarily, says Barclays analyst Zhong Xiao. In fact, over the past 12 months, he has made BABA his FCF of $27 billion, so some quick calculations show that his valuation is “most convincingly Mr. Hsiao says that it is clear that there are two.
“Our calculations assume that all of BABA's subsidiaries are given a zero value and an FCF that already includes all losses from the subsidiaries,” the analyst explained. “If you assign some value to these subs and exclude sub losses, the valuation would be much lower. We believe BABA is the cheapest major tech stock globally.”
The Chinese e-commerce giant has also prioritized its shareholders, recently buying back up to $1 billion a month in stock and likely will continue to do so for some time. Additionally, in November, the company announced its first annual dividend of $1 per share.
“There is probably no other company in our coverage other than Tencent that has done better or come close to what BABA is doing in terms of returning value to shareholders. There is no other company out there,” Xiao points out.
However, it's not all happiness in BABA's world. Less than a year after announcing its intention to spin off its cloud division, the company made a U-turn on its plans, much to the dismay of investors. However, Xiao said the latest checks suggest that the IPOs of the company's smart logistics business and Hema (high-end offline grocery store) business are on track for the first half of this year. Investors also saw frequent changes in management, with former Group CEO and Cloud CEO Daniel Zhang and former Taobao Tmall CEO Trudy Dai retiring after taking over just two years ago. I have concerns. These departures add to major concerns about the lack of leadership in what are considered the company's two most important divisions.
Overall, Hsiao reaffirmed his rating on Alibaba stock as “overweight” (i.e. buy), but lowered his price target from $138 to $109. This means his predicted growth of 57% next year. (Click here to see Shao's track record)
Two of Shao's colleagues prefer to leave it alone for now, but the other 17 reviews are all positive, making the consensus here a Strong Buy. I am. At an average price target of $119.85, the stock would trade at ~73% premium in one year. (look Alibaba stock price prediction)
To find good ideas for trading stocks at attractive valuations, visit TipRanks' Best Stocks to Buy, the tool that unites all of TipRanks' equity insights.
Disclaimer: The opinions expressed in this article are solely those of the featured analysts. Content is for informational purposes only. It is very important to perform your own analysis before making any investment.
