Should You Buy Alibaba (BABA) While it’s Undervalued?

Bullish blogger Michael Wiggins De Oliveira says now is the time to buy Alibaba (BABA), even though full-year guidance is down 49% year-over-year and macro headwinds are making investors shaky. Wiggins says no matter which way you slice it, Alibaba is undervalued and that it will appreciate in value down the line. (To watch Wiggins’ track record, click here)

Despite a challenging 2018, the blogger says BABA has strong tailwinds to its overall business model and is still growing faster than all its competitors. The Chinese e-commerce giant is such a strong bargain – Wiggins says it’s “laying in plain sight [… and that] only patient shareholders will actually benefit from this opportunity.” He goes on to insist the real benefit will not come within the next two to three months, but within the next two to three years.

Similar to Amazon Video, Alibaba has its own original content called “Youku,” which Wiggins says is a good way to retain customers, since they’re engaging with the company for longer periods of time, leading to an increase in subscription revenue. BABA hopes to have even more subscribers, as it is predicting 850 million people are about to emerge into China’s middle class in the next dozen years.

Wiggins says while BABA is out of favor with investors for the moment, he believes the sentiment will pass and that in time, value investing will work. He says he believes “common sense will return.” Wiggins does, however, acknowledge concerns from the investor community: “In part, Alibaba’s valuation is depressed because investors are concerned that Alibaba’s opaque financial disclosure makes Alibaba an investment to be avoided. To which, my response is that Alibaba is traded on the NYSE backed by SEC filings. While frauds do take place on the NYSE too, these are infrequent,” Wiggins reasons.

“In Alibaba, investors find themselves worried and unwilling to invest in a very fast-growing online retailer on one side of the planet. While at the same time, practically tripping over themselves to purchase a quickly decelerating growth stock which is significantly overvalued, back in the U.S – i.e. Amazon. Here, I side with Alibaba’s management: Alibaba is buying up its shares, as it believes its stock is undervalued. And I too, find this to be the case,” Wiggins concludes.

Regardless of what Wiggins says investors are feeling, analysts on the Street seem to be all in for Alibaba. Out of 23 analysts surveyed, TipRanks finds all 23 are bullish for BABA, with a price target of $205.41, showing an upside of just about 37%. (See BABA’s price targets and analyst ratings on TipRanks)


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