Market Overview

Pro Remains Confident In Alibaba Despite Trade War Concerns

Pro Remains Confident In Alibaba Despite Trade War Concerns

Alibaba Group Holding Ltd (NYSE: BABA) has seen its stock fall more than 15 percent since its June highs due to trade war concerns.

What's lost among many investors is that the Chinese company is a lot more than a simple e-commerce platform, according to Boris Schlossberg.

The managing director of FX strategy for BK Asset Management discussed Alibaba's stock during a CNBC "Trading Nation" segment.

The Thesis

Alibaba is one of the biggest companies in the world and valued at nearly $500 billion, Schlossberg said. Yet the company has its "hands in so many businesses," including artificial intelligence, potentially making it difficult for investors to understand its true potential. 

The company has posted strong results as of late, including Thursday's earnings report, which showed 61-percent revenue growth. Over a longer-term timeframe, Alibaba increased its free cash flow by more than 400 percent over the past four years.

Alibaba is a pure play on the fast-growing Chinese middle class, which happens to be the largest consumer segment of its kind on the planet, Schlossberg said. The company's ongoing expansion to new markets worldwide also makes it the "purest long-term bet" on global growth, with many years of double-digit gains still to come, he said. 

Alibaba shares have slipped below the $200 mark; if the stock moves to the $150 levels, investors with a three- to five-year timeframe should consider buying the stock, in Schlossberg's view. 

Q1 Review

Alibaba said Thursday morning it earned $1.22 per share in the fiscal first quarter on revenue of $12.229 billion versus expectations of $1.21 per share and $11.79 billion. Income from operations fell 54 percent from a year ago to $1.212 billion due to a one-time increase related to share-based compensation expenses, the company said. Without the one-time cost, income from operations would have risen by 9 percent.

Revenue from the core e-commerce platform rose 61 percent from a year ago to $10.456 billion. Cloud computing revenue rose 93 percent to $710 million; revenue from digital media and entertainment rose 46 percent to $903 million; and revenue from innovation initiatives rose 64 percent to $160 million.

In terms of user metrics, active consumers on the China retail marketplace rose 24 million from the end of March to 576 million, and mobile monthly active users rose 17 million to 634 million over the same time period.

Price Action

Alibaba Group shares were trading higher by 2.78 percent off the open Thursday. 

Related Links:

Raymond James Cuts Alibaba Price Target On Currency Weakness, But Stock Remains Top Large-Cap Pick

KeyBanc Upgrades Baidu, Lowers Alibaba Estimates In Chinese Internet Update

Photo courtesy of Alibaba. 

Posted-In: BK Asset Management Boris SchlossbergEarnings Long Ideas News Top Stories Media Trading Ideas Best of Benzinga


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