Alibaba may be the cheapest e-commerce and cloud computing investment in the world. The stock, at about $89, trades for just 10 times projected current-year earnings, well below Amazon’s 45 times. It also sits on $50 billion of net cash, or about 25% of its market value.
Alibaba stock is worth a look for the new year.
The problem is China’s economic woes and the government’s mercurial attitude toward homegrown tech companies. Concerns about President-elect Donald Trump’s tough-on-China stance and doubts about the effectiveness of the country’s economic stimulus are also weighing on shares, which have pulled back from a high of $117 in September.
One fan is superstar hedge fund investor David Tepper, who runs Appaloosa Management. Alibaba is his largest holding, although he did trim the stake in the third quarter.
The company believes that its stock is a bargain and has repurchased 7% in the first three quarters of 2024. “Alibaba is cheap relative to its own history, it’s cheap relative to its peers, it’s sitting on a ton of cash, and a lot of headwinds are turning into tailwinds,” says Burns McKinney, a senior portfolio manager at NFJ Investment Group.
If investors warm to the depressed Chinese stock market, Alibaba could be up 50% in 2025.