In their latest report, Alibaba announced that they repurchased another $5.8B worth of shares in Q2. Over a period of 3 years, $BABA has been able to reduce its shares outstanding by close to 14%.
There are a few points to consider when investing in Alibaba:
- Despite revenue growth slowing, Alibaba remains a cash flow machine with strong fundamentals and is trading close to all-time lows in multiple metrics.
- Alibaba's focus on share buybacks, dividend issuance, and expansion into AI and cloud computing make it a strong long-term investment with the potential for significant returns.
- Alibaba provides a large margin of safety for long-term investors looking for exposure in China.
- They have plenty of cash to spend as they have a load of money on their balance sheet. They are using this to buy back even more shares or to issue a special dividend like they did recently.
I believe Alibaba is suffering significantly from the sentiment that is completely in the gutter regarding China. As such, Chinese equities with Alibaba being one of my personal favorites, are currently giving investors an enticing value proposition with a relatively high margin of safety.
While the thesis might take a while to play out, an improvement in sentiment could quickly launch the stock price higher.
What do you personally think of Alibaba?
Full disclosure: I'm currently net long on Alibaba through a multitude of options, but my position might evolve rapidly. Nevertheless, I don't think $100+ relatively soon is out of the question.
Leave a Reply