From Nasdaq:

Alibaba stock has been underperforming the broader tech indices, declining by about 7% year-to-date and by over 40% over the last 12 months. These issues have been attributed to the slower-than-expected rebound in the Chinese economy as well as increased competition in the e-commerce space. Alibaba also scrapped plans to spin off its cloud unit, citing U.S. restrictions on the export of advanced semiconductor chips as a reason. The company’s stock has underperformed the S&P 500 consistently over the past three years as well.

In contrast, the High Quality Portfolio, which is a collection of 30 stocks, has outperformed the S&P 500 each year over the last three years. The current macroeconomic environment of high oil prices and elevated interest rates raises concerns of Alibaba underperforming the S&P over the next 12 months.

Even though Alibaba’s price estimate has been reduced due to various headwinds, the stock looks undervalued at its current levels. Regulatory issues with Alibaba’s affiliate and digital payment services appear to be in the past, as China’s Central Bank stated that the domestic tech industry will see “normalized supervision.” Despite higher risks for Chinese stocks, Alibaba’s valuation is compelling at about $69 per share.

Alibaba’s valuation of about $102 per share implies a considerable upside over the market price. The company’s overall valuation is much more favorable compared to U.S. e-commerce behemoth Amazon, as Alibaba stock trades at about 7.5x forward earnings, whereas Amazon trades at roughly 45x forward earnings. Furthermore, Alibaba’s revenues are likely to trend upwards, suggesting high single-digit growth levels over the next two fiscal years.



Read more: Down 40% In The Last 12 Months, Is Alibaba Stock Undervalued At $70 Per Share?