Is BABA One of the Most Undervalued Stocks Available? Our Rating Says Yes

Our main goal is to deliver actionable investing advice that can potentially grow your portfolio. Right now, we’ve got our eye on Chinese e-commerce giant Alibaba Group Holding Ltd (NYSE: BABA). 

The stock boasts a Zen Rating of B, meaning it’s in the top 20% of stocks in our system. Stocks with a B rating have delivered average annual returns of 19.88%.

Right now could be an opportunity to buy the dip. BABA has been in a slight decline, decreasing in share price by 12.77% over the last month. But our 115-factor rating system reveals plenty of opportunities for a turnaround. 

However, it is still up 17.90% over the last year, with a price as of this writing of $85.68. That aforementioned selloff played and still plays a heavy role in its current price.

Speaking of its price, how does it look upon a closer view of its valuation? After all, it gets a Component Grade of A for Value from our Zen Ratings. Its P/E is 17.16, much better than the industry average of 53.57x and even the US market P/E average of 28.28. Similarly, it has a PEG ratio of 0.58x, a sign that it is undervalued (and quite significantly so).

Why is this the case? The main concern for BABA is the threat of tariffs on Chinese goods from the incoming Trump administration. However, these are unknown, the terms change by the day and news articles, and the likelihood of extremely high tariffs now seems slim given the backlash and eventual economic effects.

Similarly, there is still room for growth for BABA, and it has a Strong Buy consensus among analysts.

• Jiong Zhao of Barclays highlights that quarterly results were consistent with expectations and that its share repurchase program, if continued, will eventually show results.
• Rob Sanderson of Loop Capital noted BABA’s ongoing market share stabilization and monetization efforts as factors that favor BABA.

Additionally, average analyst forecasts predict that BABA could increase 29.82% in the next 12 months. This is supported by the fact that earnings are forecast to grow faster at 29.74% per year than the market average and the industry average.

Key Reasons to Look into BABA:

• It has a Zen Rating of B. On average, stocks with this rating grant a return of 19.88% per year, well above the market average.
• By nearly all our metrics, it shows signs of being undervalued for its current price, and there are similar signs of growth in the stock. How long this will last remains unseen, so it’s one to check out now.
• The concerns over tariffs are likely greater than the reality of what will happen. And even in the case of high tariffs, the Chinese government has often used subsidies to soften economic blows (for good or ill long term).

However, there is so much more you can learn, including forecasts, other analyst opinions, and metrics, if you sign up for WallStreetZen Premium. With it, you’ll gain an unlimited watchlist to keep track of BABA and related stocks, as well as a Due Diligence Score to simplify fundamental research and information on why stock prices move. 

If you spend even an hour a month researching stocks, it’s a worthwhile investment that saves you time and will help you make better investments.

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