Vetr Blog

Crowdsourced price predictions for the stock market.

Alibaba: A Good Entry Point Ahead of Earnings?

In the few short months since its record-setting $25 billion IPO, Alibaba Holdings ($BABA) has become very popular among U.S. investors. It is already the fifth most widely-held stock in TD Ameritrade client portfolios, no mean feat given $BABA is a Chinese company relatively unknown in the U.S. outside Wall Street.

The stock’s popularity is for good reason. Alibaba is the largest online commerce company in the world, with hundreds of millions of users interacting with millions of merchants every day. As with most things Chinese, the scale is massive and hard to understate; transaction volume on$BABA’s sites reached $295 billion in sales in 2014, more than eBay ($EBAY) and Amazon ($AMZN) combined. Sales growth, as you’d expect, is very robust; revenue in the third quarter climbed 54% year-over year. And to think online shopping penetration in China is still less than 50%…

The stock has rapidly become a darling among users as well. It earns four stars, with 50 active ratings on $BABA on the platform. Of these, 42 are buys, three are holds and five are sells. For its part, the Wall Street establishment is even more bullish on $BABA than our users are, with 32 buys, three holds and zero sells (undoubtedly a function of that IPO we mentioned earlier) users have an average 6-month price target of $124, some 24% higher than the stock’s current levels of $99.58. Fundamentally, though, the stock is anything but cheap…but then again, rapid growth never is.

Alibaba reports quarterly earnings on Friday, February 13. The market is looking for revenue of $4.45 billion and earnings per share of $0.75 per share, and all eyes will be on the company’s user metrics. Meanwhile, $BABA is aggressively going after China’s 600 million mobile phone users and using some of its IPO windfall to invest heavily into such areas as payment platforms, digital media and financial services. Despite the outlook, $BABA has fallen off from its post-IPO surge, dropping from $120 per share back in November and breaching the psychologically key $100 mark during an admittedly weak few days of trading in New York.

What’s your take on $BABA? Will the earnings release in a few weeks propel this stock higher, or does the current price already reflect Alibaba’s fantastic growth? Make a rating!