Alibaba Group Holding Limited (BABA) is the largest e-commerce retailer in China, with 12-month revenue of $134.54 billion. The company is ranked 63rd on the Fortune Global 500 list.
The company came under fire in November 2020, just ahead of the highly anticipated Ant Initial Public Offering SEO. He was a top target during the country’s regulatory crackdown on tech giants and had to pay a record $2.80 billion in antitrust fines. Shares of BABA are down 66.34% since November 2020 to close yesterday’s trading session at $98.52.
Nonetheless, China appears to be easing its regulatory crackdown on tech stocks lately. On June 9, the government gave provisional approval for relaunching BABA-backed dual listing of Ant Group in Shanghai and Hong Kong. BABA shares gained more than 24% between May 25 and June 8.
Here’s what could shape BABA’s performance in the short term:
Mixed Growth History
BABA’s revenues have grown at CAGRs of 31.3% and 40.1% over the past three and five years, respectively. The company’s EBITDA has grown at CAGRs of 10.9% and 16.3% over the past three years and five years, respectively.
Additionally, BABA’s net profit has improved at a CAGR of 7.3% over the past five years, while EPS has improved at a CAGR of 6% over this period. However, the company’s net income and EPS have declined at a rate of 10.9% and 12%, respectively, per year over the past three years. Additionally, its leveraged free cash flow has been declining at a rate of 15.3% per year for the past three years.
BABA’s revenue over the past 12 months increased by 18.9% year over year, while total assets increased by 8% during this period. However, the company’s trailing 12-month EBITDA and net income were down 14.3% and 58.7% year-over-year, respectively. Additionally, BABA’s trailing 12-month EPS fell 58.4% year-over-year, while leveraged free cash flow was down 69% year-over-year. other.
Mixed profit margins
BABA’s gross profit margin over the last 12 months of 36.76% is slightly above the industry average of 36.25%. His last 12 months EBITDA and net profit margins of 15.74% and 7.3% are significantly above industry averages of 12.11% and 6.56%, respectively. Additionally, the company’s leveraged trailing 12-month free cash flow margin of 6.78% is 96.5% higher than the industry average of 3.45%.
However, BABA’s 12-month ROE, ROTC and ROA of 6.57%, 4.73% and 3.67% compare to industry averages of 17.15%, 7.38% and 5.63%, respectively. Additionally, its 12-month asset turnover rate of 0.5% is 51.1% below the industry average of 1.03%.
In non-GAAP forward PER terms, BABA is currently trading at 13.31x, 17.5% higher than the industry average of 11.33. The stock’s price-to-forward multiple of 1.90 is 124.6% higher than the industry average of 0.85. Additionally, its forward-looking EV/EBITDA and EV/Sales ratios of 11.04 and 1.94 compare to industry averages of 8.46 and 1.07, respectively.
Additionally, BABA is currently trading at 8.79x future cash flow, 7.5% higher than the industry average of 8.18x.
Consensus Rating and Price Target Indicate Upside Potential
Of the 19 Wall Street analysts who rated BABA, 17 rated it Buy, while two rated it Hold. The 12-month median price target of $159.84 indicates a 62.2% upside potential from yesterday’s closing price of $98.52. Price targets range from a low of $115.00 to a high of $276.00.
POWR Ratings Illustrate Uncertainty
BABA has an overall rating of C, which translates to Neutral in our own POWR Rankings system. POWR ratings are calculated by considering 118 separate factors, with each factor weighted to an optimal degree.
BABA has a C rating for Momentum, Quality and Growth. The stock is currently trading slightly below its 50-day and 200-day moving averages of $95.13 and $125.27, respectively, in sync with the Momentum rating. Moreover, BABA’s mixed profit margins and growth justify the Quality and Growth ratings respectively.
Of the 41 shares listed F China group, BABA is ranked #24.
Beyond what I said above, check out BABA ratings for sentiment, stability and value here.
Despite the easing of government regulations, Ant Financial Services Group, backed by BABA has no plans to relaunch its IPO, according to a company spokesperson. BABA shares have fallen 16.5% since that June 9 press release. Additionally, with e-commerce sales slowing globally, BABA’s profit margins have shrunk in recent quarters. Thus, investors should wait for BABA to stabilize before investing in the stock.
How does Alibaba Group Holding (BABA) compare to its peers?
Although BABA has a C rating in our proprietary rating system, one might consider looking at its industry peers, NetEase Inc. (NTES), FinVolution Group (FINV) and China Automotive Systems, Inc. (CAAS), which have a B (buy) rating.
Shares of BABA were trading at $104.85 per share on Tuesday morning, up $6.33 (+6.43%). Year-to-date, BABA is down -11.73%, compared to a -20.89% rise in the benchmark S&P 500 over the same period.
About the Author: Aditi Ganguly
Aditi is an experienced content developer and financial writer who is passionate about helping investors understand the dos and don’ts of investing. She has a keen interest in the stock market and has a fundamental approach when analyzing stocks. After…