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Yahoo
07-07-2025
- Business
- Yahoo
Why Alibaba Stock Looks Like a Screaming Buy After Falling 27% From Its 2025 Highs
While Alibaba (BABA) stock had a strong start to the year, it has looked weak over the last three months, gaining just 1.4% over the period. The stock is still up a handsome 27% for the year, but trades 27% below its 2025 highs. In this article, we'll discuss why BABA stock looks like a strong buy following its recent underperformance. To begin with, let's look at the reasons behind the recent weakness in Alibaba stock. Alibaba's recent financial performance has underwhelmed, and the company missed March quarter earnings by a mile, with its profits coming in at just about half of what analysts were expecting. It is also facing intense competition in China from the likes of PDD (PDD), (JD), and TikTok's parent company, ByteDance, and markets are apprehensive about the potential losses in the instant delivery business, given the fierce price war in that market. Chevron Stock's 4.6% Dividend Yield and 1.67% One Month Short Put Yield Make CVX a Buy Tariff Dealine, Fed Minutes and Other Key Thing to Watch this Week SoFi Stock Is Betting on Crypto Again. How Should You Play SOFI Stock Here? Markets move fast. Keep up by reading our FREE midday Barchart Brief newsletter for exclusive charts, analysis, and headlines. Last week, Alibaba completed the sale of bonds worth $1.5 billion that are exchangeable into shares of Alibaba Health Information Technology, after which the stock saw selling pressure. Finally, the lack of any new major stimulus measures from China has also put pressure on names like Alibaba. Despite these challenges, BABA remains a Wall Street favorite and is rated as a 'Strong Buy' by 19 of the 21 analysts covering the stock. One analyst each rates it as a 'Moderate Buy' and 'Hold,' while the mean target price of $163.12 is nearly 50% higher than current price levels. Alibaba stock trades even below the Street-low target price of $140, while the Street-high target price of $180 is over 65% higher. Analysts' optimism towards Alibaba seems related to its tepid valuations. The stock trades at a forward price-earnings (P/E) multiple of 11.57x while the P/E-growth (PEG) multiple is 0.47x. While such low multiples are almost unheard of for U.S. tech stocks, the valuations of Chinese tech companies have taken a structural hit following the tech crackdown of 2021, and U.S.-China trade tensions are not helping matters either. Alibaba's growth has visibly slowed down as first, the Chinese economy is no longer the kind of growth engine that it once was, and second, there is intense competitive pressure that's putting pressure on Alibaba's top-line growth and margins. That said, the company is positioning itself for the next era of growth. For instance, it is looking to expand its target market and is doubling down on instant commerce, which its CEO of e-commerce business, Fan Jiang, termed as the new 'racetrack' for the company. Alibaba is advancing in AI, and during its fiscal Q4 earnings call, it said that its revenues of AI products and services have grown in triple digits for the last seven consecutive quarters. The company has vowed to invest over $50 billion over three years to expand its AI capabilities. Given China's strict data policies, any foreign company looking to offer AI services in China might need to partner with domestic Chinese companies, which is an opportunity for Chinese AI giants like Alibaba. Alibaba has partnered with German auto giant BMW (BMWKY) to bring AI to its cars. It is also collaborating with Apple (AAPL) to bring 'Apple Intelligence' features to iPhones in China. While that deal is reportedly facing scrutiny in the U.S., the Cupertino-based company might eventually need to partner with a Chinese company to bring its AI features to China. Cloud is another key growth driver for Alibaba, and the company is the biggest cloud service provider in Asia and the fourth largest globally, after Amazon (AMZN), Microsoft (MSFT), and Google (GOOG). Alibaba is also investing in its international operations, which will help it expand its target market. Over the medium to long term, listing its fintech subsidiary Ant Financial would also help Alibaba unlock value. For context, that IPO was halted by China in 2020, apparently to target Alibaba's co-founder, Jack Ma. The country's leadership has since reconciled not only with Alibaba (and Ma), but also with its private tech sector, which it previously cracked down on. The higher capex toward AI could take a toll on Alibaba's profitability and cash flow in the near term. That's, however, a common theme for U.S. hyperscalers. The aggressive pivot towards instant commerce will also hit Alibaba's profitability, and earlier this month, the company outlined a $7 billion subsidy spread over 12 months to boost adoption. However, given the somber valuations, I believe Alibaba stock is a good buy for someone willing to hold the stock for at least a couple of years. The company's current initiatives should pay off in the medium to long term, and the current weakness is a good opportunity to buy shares of this beaten-down tech name. On the date of publication, Mohit Oberoi had a position in: BABA, JD, AAPL, AMZN, MSFT, GOOG. All information and data in this article is solely for informational purposes. This article was originally published on
Globe and Mail
04-04-2025
- Business
- Globe and Mail
Could Trump's New Tariffs Push Apple Stock Below $184?
Apple (AAPL) shares took a sharp hit, falling 9.25% to close at $203.19 on April 3. This was followed by another roughly 5% dip in afternoon trading on April 4. The steep drop comes on the heels of President Donald Trump's announcement of new 'reciprocal' tariffs, and the market is beginning to price in the broader implications. With trade tensions heating up and tariff rates set at 54% for Chinese imports (factoring in previously announced tariffs), 26% for India, and 46% for Vietnam, Apple's supply chain and its bottom line are under pressure. Given the tariff-led headwind, at least one Wall Street analyst expects the iPhone maker's stock to reach $184, the Street-low price target. Let's explore what the new development means for Apple, how the company is positioned to weather the storm and determine whether its stock will drop below the Street-low price target. The Impact of Tariffs on Apple The iPhone maker, known for its production network outside the U.S., is particularly vulnerable to tariff shocks. A large portion of Apple's manufacturing is based in countries now facing significant import restrictions. China has responded with its own tariffs, imposing a 34% duty on all U.S. imports, escalating the tit-for-tat trade spat. Apple CEO Tim Cook remained cautious during the Q1 2025 earnings call. He said that the company is monitoring developments. However, Apple's annual filings provide a clearer view of the stakes, acknowledging that trade restrictions, including tariffs, could materially impact the business, especially in regions integral to its revenue and supply chain. Notably, such regions include China, where Apple generated $18.51 billion in revenue in the latest reported quarter, roughly 15% of its total sales. The ripple effects from these tariffs may strain margins, disrupt operations, and potentially drive up product prices at a time when global consumers are becoming increasingly price-sensitive. The worry is that as Apple absorbs higher costs from import duties, it may be forced to pass some of that burden to consumers. This, in turn, could soften demand, particularly in sensitive international markets. Beyond rising production costs, these geopolitical risks can introduce new operational headaches. Apple may be forced to restructure supplier relationships and shift manufacturing hubs. These aren't quick fixes. They take time, cost money, and may be highly disruptive. Moreover, the unpredictable nature of international trade policy means these shifts may come with little warning. The Road Ahead for Apple Stock The new tariffs will likely hurt Apple's margins and earnings. Still, not everything is pointing south. Apple entered 2025 on strong footing. It delivered a record-breaking December quarter with $124.3 billion in revenue, up 4% year-over-year. The company reported strength across all major geographies. Services, in particular, stood out, with revenue hitting an all-time high of $26.3 billion, growing 14% year-over-year. This segment's 75% gross margin continues to provide a profitable cushion against the more volatile hardware business. Apple's product line also showed some growth. iPad and Mac sales helped lift total product revenue to $98 billion, and the company's installed base of active devices surpassed 2.35 billion, reflecting customer loyalty and retention. The iPhone's active installed base reached an all-time high, indicating continued interest in its flagship device. Margins held strong despite early signs of pressure. Gross margin for the quarter came in at 46.9%, at the top of Apple's guidance range. Product margin increased to 39.3%, while services margin climbed to 75%, driven by favorable mix and operational leverage. Wall Street remains cautiously optimistic about Apple's prospects. The consensus rating on Apple stock is a 'Moderate Buy,' reflecting the risks and the long-term strength of Apple's ecosystem. Whether the stock dips below $184 or stabilizes will depend on how trade dynamics evolve and how effectively Apple adapts. However, the stock could remain under pressure given the uncertainty led by new tariffs.
