Alibaba's Breakout Could Take Shares Higher From Here by Victor Dergunov

Summary

  • Alibaba is breaking out above major resistance, and for good reason.
  • China/U.S. trade deal tensions appear to be easing, the company continues to report extremely strong numbers, and the stock is cheap.
  • Moreover, Alibaba is expanding its internet empire by developing numerous businesses, funding them by the tremendous cash flow it generates from its core commerce operations.
  • Analysts seem to agree that the stock is undervalued.
  • If the global economy remains stable, I see Alibaba moving towards $250 or higher within the next 6-12 months.
  • This idea was discussed in more depth with members of my private investing community, Albright Investment Group . Get started today »

Image Source

Alibaba's Beautiful Breakout

Alibaba's (BABA) breakout above $200 is significant, and it suggests the stock can go substantially higher from here. After hitting a post-IPO low of below $60, BABA had a stellar run-up, more than tripling in roughly 2 years. However, since then, BABA has been in a prolonged consolidation phase, and the stock finally looks ready to begin its next wave higher.

BABA 3-Years

Image Source: StockCharts.com

Alibaba is expected to continue to grow revenues at roughly 30% per year in fiscal 2020 and in fiscal 2021. Considering the company's rapid revenue growth rate, the stock appears extremely cheap, trading at roughly 20 times forward earnings or lower (by my calculations). Additionally, Alibaba continues to expand its portfolio of businesses, diversifying in cloud, media/entertainment, and in other innovative initiatives and solutions.

At $200 per share, Alibaba remains an incredibly undervalued conglomerate likely to expand revenues, EPS, and its share price substantially in future years.

Technical Image

In a previous article, I wrote in August, I mentioned that Alibaba was a "Strong Buy Into Earnings". Since then, the stock has appreciated by about 22%. Nevertheless, despite the significant rise, the technical image remains very bullish.

BABA 1-Year

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