Impact of Buybacks on Alibaba's Stock #investing #stock #baba #alibaba #analysis #valueinvesting

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Following the crackdown of the Chinese government from a few years ago, Alibaba’s (NYSE: BABA, HKSE: 9988) stock is now close to some of the lowest levels in history.

However, with a pretty big discrepancy between the company and stock, as well as a lot of potential from many factors, as you are about to see, Alibaba (NYSE: BABA, HKSE: 9988) might be a good stock to buy today.

A majority of the money they make is from the local eCommerce, but they also make money from cloud and several growth engines. Combined, the rest of the business, meaning logistics, international eCommerce and the others provide around half of the revenues.

However, when you think about it, this half has the potential to be scaled a lot more thanks to international expansion. If they grow in international eCommerce, then the Logistics, the Services and so on, can also grow together.

Overall, Alibaba is a very good company and is definitely undervalued. They have excellent financials, they are very profitable and still have a lot of potential to grow. The buybacks and the end of SoftBank selling their stake could potentially be a very nice catalyst, especially if backed by good reports. Again, I have enough and probably won’t buy unless it crashes a bit more, but this is an objectively good price in my opinion.

They can produce a free cash flow of something around $20 to $25 billion today, so they are currently traded at a ratio of around 8. But, we saw them make even $35 billion in a very good year, so they have potential, especially if they expand.

We can see that the CAPEX is kind of low recently which might be a bit concerning, but I think it’s something you have to look at over more than just one year.

Now, to get to the financials, they have current assets of around $114 billion, which are more than enough to cover the company’s total liabilities.

Something very impressive is the 44% growth in the International business. With a new logistics center in Turkiye and a couple more opened in the US last year, this can unlock a lot of value in the future.

I mean, Pinduoduo was able to get quite a lot of traffic in these areas with Temu, so there is potential to grow in the regions even with giants like Amazon and eBay already well established in the market.

Still, competition remains a problem, but even if they solidify a relatively small market share in these regions, there is still potential to grow. A company like Amazon for example has many times more capital available than Alibaba is worth, so they can be quite an issue.

I think Alibaba is a very cheap way to get exposure not only to a very good company, but also to China's potential recovery. And again, if there is a potential reversal in their policies, Alibaba would benefit A LOT.

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