Alibaba’s (NYSE: BABA) stock is clearly oversold. The stock’s 8% drop, albeit healthy, after its nearly 35% appreciation from 52-week lows, may just be due to profit-taking. Investors with a long-term time horizon may ignore the noise hurting the stock.
Alibaba is set to report quarterly earnings on August 3. While markets often have a short-term time horizon, that impatience creates an opportunity for investors who missed the last rally in the stock. In its last report, Alibaba reported incredible numbers, sending the stock from a $170 low to $210.
Once again, the China/U.S. trade dispute creates plenty of noise. Ultimately, this “information” is of no consequence for Alibaba’s business. The online retailer makes most of its revenue in China. Its dominance in cloud computing, through Alibaba Cloud, revenue from transactions, through Alipay, and its core Alibaba business will thrive no matter how the trade disputes play out.
Of the Chinese companies, Alibaba’s diversification is the most attractive for conservative investors. Conversely, iQIYI, Inc. (NASDAQ: IQ) relies on online video, Baidu (NASDAQ: BIDU) depends on online advertising, and JD.COM (NASDAQ: JD) targets the high-end goods market.
Takeaway
Alibaba stock could underperform until the company reports earnings. Once it is released, investors who did not hold on to the stock may regret it if management smashes estimates. Again.
