Alibaba Quick Stock Review: Is Alibaba Stock a BUY in 2023 Thanks to China’s Recovery?

Alibaba Stock Review: Is Alibaba Stock a BUY in 2023 Thanks to China’s Recovery?

Alibaba (NYSE: BABA stock) is a Chinese multinational conglomerate holding company specializing in e-commerce, retail, Internet, and technology.

In the past few months, the stock increased a lot as a result of China’s easing of the zero-COVID policy, boosting the whole market in the process.

In its most recent quarter, Alibaba reported revenue of $29.1 billion, an increase of 3% year-over-year, and Non-GAAP diluted earnings per share came in at $1.82, a 15% increase year-over-year.

The free cash flow in the latest quarter was $5.02 billion, an increase of 61% compared to the same quarter of 2021, which is not bad for a market capitalization of $310 billion considering the micro and macroeconomic factors that affected Alibaba.

In the first 3 quarters of 2022, Alibaba bought back shares (NYSE: BABA stock) worth $18 billion, as part of the company’s $25 billion share repurchase plan. This plan was upsized in Q3, increasing the total by another $15 billion and extending its lifetime to 2025.

The company has several tailwinds for growth, including: the company's dominance in the Chinese e-commerce market, along with its expansion into new markets such as India, which is expected to drive continued earnings growth; On top of that, there is also an apparent easing of the Chinese regulatory pressure. Also, the company's cloud computing division is also expected to see strong growth as more businesses shift to digital operations and adopt cloud technology.

As for a valuation, the company currently has the potential to generate around $22.5 billion in free cash flows per year, with a lot of growth ahead. For a market capitalization of $310 billion, that would be a price to free cash flow ratio of 13.8, which is very low for a tech company with such high potential. For reference, Amazon has a negative free cash flow of over $25 billion, while the company is worth 3 times more than Alibaba. It is clear that the market is very pessimistic about Alibaba due to China-related risks.

Overall, Alibaba is a company with a strong financial performance and growth prospects, with a relatively fair/undervalued valuation. Alibaba’s dominant position in the Chinese e-commerce market and growth in areas such as cloud computing make it a company to watch, especially if we enter into a recession.



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