Investing in Alibaba Amid Stronger US-China Relations

The author has bought Alibaba stock, citing a potential improvement in US-China relations as a catalyst for growth. Despite a 12% price drop since the last analysis, the author believes there is an exceptional investment opportunity in Alibaba and the broader Chinese market.

Despite a recent 12% price drop, Alibaba (BABA) remains a compelling investment opportunity for those who believe in the potential improvement in US-China relations. The company, China's largest tech conglomerate, operates across various high-growth sectors, including e-commerce, cloud computing, digital payments, logistics, and AI-driven services [1].

Alibaba's stock has been trading around the psychological level of $100 per share, with a nearly 50% upside potential over the next 12 months, according to Wall Street consensus [1]. The company's forward non-GAAP P/E ratio of 11 is significantly below the sector average of 18, positioning Alibaba as undervalued by traditional metrics [1].

The shift in sentiment towards Alibaba is evident. Major investors, including Bridgewater, have been quietly accumulating shares, signaling growing confidence in the stock despite ongoing geopolitical concerns [1]. The U.S. has reasserted its global influence, and recent trade de-escalation and diplomatic signals point towards a possible turning point in US-China relations [1].

BofA Securities has lowered its price target on Alibaba to $135, citing increased investment in the company's food and on-demand delivery services [2]. Despite the lowered target, analysts express confidence in Alibaba's long-term growth potential, particularly in cloud computing and AI [2].

Alibaba's recent performance has been mixed, with revenues falling short but profitability exceeding expectations [2]. The company's solid financial health score and healthy revenue growth support its expansion strategy, with the firm projecting average daily orders to approach 70 million in the September quarter [2].

The main downside risk for Alibaba lies in escalating China-US tensions, but even in the unlikely event of a full-scale conflict, both nations have an incentive to maintain peaceful relations [1]. As the market applies a "geopolitical discount" to Chinese equities, savvy investors are choosing to look beyond the headlines and place their bets on a more stable global outlook [1].

In conclusion, Alibaba presents an exceptional investment opportunity for those who believe in the potential improvement in US-China relations. Despite the recent price drop, the company's strong fundamentals and undervalued valuation make it a compelling choice for investors.

References:
[1] https://www.tipranks.com/news/alibaba-baba-bulls-rejoice-as-u-s-china-trade-war-nears-ceasefire
[2] https://ca.investing.com/news/analyst-ratings/alibaba-stock-price-target-lowered-to-135-at-bofa-on-delivery-investment-93CH-4098370