Stock Pick of the Week with Momentum Securities: 17 March 2021 - Alibaba Group Holdings Ltd
Momentum’s leading stockbroking division – Momentum Securities – will be bringing you their Stock Pick of the Week, each week on a Wednesday or Thursday. The stock pick motivation is available as written content and a downloadable video and audio clip.
This week’s pick: Alibaba Group Holdings Ltd
About: Alibaba Group Holdings Ltd, also known as Alibaba Group is a Chinese, multi-national holdings company that specializes in offering e-commerce services, internet infrastructure, online financial and content services, through the company’s subsidiaries. Alibaba envisions to be on the frontier of developments in the infrastructure of commerce, seeing that Alibaba's core business operation lies within e-commerce, with cloud computing steadily growing.
Portfolio Manager for Momentum Securities, Wiehan van Zyl shares his insight on Alibaba Group Holdings Ltd.
Click here to download:
• the audio clip
• the video clip.
Where we see the growth for 2021 and for 2022 are emerging markets and more specifically, China. The International Monetary Fund (IMF) projects that China's economy will grow by 8.1% for the rest of this year and 5.6% in the year 2022, according to the latest World Economic Outlook, released at the end of January this year. This leads me to our Stock Pick of the Week, which is the Chinese tech giant - Alibaba Group Holdings Ltd.
Due to the recent rise in the US’ 10-year Treasury yields, Alibaba is down 19% from recent highs and down 29% from its all-time high at the end of October last year. Alibaba represents one of the highest quality hypergrowth, blue chip stocks you can buy today. It began the tech pullback highly undervalued, and it's now 42% undervalued, according to FactSet. Post earnings when management updated analysts on regulatory risks; the long-term growth rate consensus from all 59 analysts went up from 22.3% to 26%, compound annual growth rate.
Thus, the growth consensus has improved. Yet, Alibaba is now trading with some of the lowest valuations in its history, resulting in a 27% compound annual growth rate consensus return potential through 2027, and six times the adjusted expected returns of the S&P 500 Index, over the next five years. Alibaba is also now trading at a P/E (Price-to-Earnings Ratio) of 27.6, compared to an average of 38, making it relatively cheap at these levels.
