Chinese tech giant Alibaba (NYSE:BABA) reports earnings on Tuesday and with the stock trading near 52-week lows, it's a tempting time to pick up the stock – but has it gotten too risky? Chinese stocks have been in the news over the past several weeks for all the wrong reasons as concerns about crackdowns and tighter regulations has made investors worried. And it's no coincidence that Alibaba has been underperforming. In the past year, the stock has fallen by 23% even as the S&P 500 has been having a terrific time, up around 35%.
Concerns about some Chinese stocks getting delisted from U.S. exchanges are legitimate worries, especially for those companies that pose risks to national security. But that doesn't mean Alibaba is in danger or at any risk now or in the foreseeable future. And relations could improve between the two nations to put those worries to rest. In the meantime, Alibaba is likely going to keep growing and getting bigger, especially as the economy delivers strong numbers. China's GDP grew at a rate of 7.9% in the second quarter, slightly ahead of the U.S.'s growth rate of 6.5%.
In its last quarter results, released on May 13, the tech company generated year-over-year revenue growth of 64% (and 40% without including contributions from its recent acquisition -- Sun Art). The stock is trading at a forward price-to-earnings multiple of 20, which is a bargain compared to Alphabet (NASDAQ:GOOG) and Amazon (NASDAQ:AMZN), which trade at 27 and 60 times their future earnings, respectively.
Alibaba is an intriguing investment that could have plenty of upside for investors who are willing to bear some risk and adversity surrounding Chinese stocks right now. Buying before earnings could be a great move.
