Luckin Coffee’s (OTC:LKNCY) bankruptcy should not shock investors who speculated on the firm. Trading on the pink sheets, the development is another reminder on the risks of investing in overseas companies. Luckin will not dent Alibaba (NASDAQ:BABA)’s valuation. Yet it should warn investors on the risks of high-flying stocks with corrupt insiders.
Of all the stocks based in China, Alibaba is the best pick. The company posted GAAP EPADS of $4.42, beating expectations by $1.85. Revenue grew by an incredible 37% Y/Y to $33.88 billion. As usual, Alibaba’s commerce retail business lifted results.
The company’s customer base continues to grow. Mobile MAUs in the marketplace topped 902 million, up 21 million sequentially.
For the first time, Alibaba Cloud, which is akin to Amazon’s AWS cloud solution, posted adjusted positive EBITA in the quarter. Its Cainiao network was also operating cash flow positive.
Underperforming Stock
BABA stock is acting much like Apple (NASDAQ:AAPL), Facebook (NASDAQ:FB), ASML, and Lam Research (NASDAQ:LRCX). Markets may have priced in the good news already and are not rushed to buy shares. Since the post-ER stock underperformance, patient investors may accumulate BABA stock from here. Waiting for selling pressure to end may create a better entry price.
Timing the buy at a discount could prove tricky. The upside prospects on the stock price are considerable, in light of the strong quarterly results.
