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Is It Too Late to Buy Alibaba (BABA) Stock?

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Written by Timothy Sykes Reviewed by Jack Kellogg Fact-checked by Ellis Hobbs
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Alibaba’s stocks have shown a promising uptick amid news of a strategic corporate restructuring plan, which has been positively received by investors. Additionally, reports of strong sales growth in the core e-commerce sector have further bolstered market sentiment. On Tuesday, Alibaba Group Holding Limited American Depositary Shares each representing eight’s stocks have been trading up by 2.6 percent, reflecting investor optimism.

Quick overview of Alibaba’s (BABA) Latest Market Move:

  • JPMorgan signals an upcoming valuation boost for Alibaba shares due to its Stock Connect inclusion.
  • Alibaba unveiled over 100 new open-source AI models and text-to-video AI tools, marking its entry amidst intense competition.
  • The company inked a five-year cloud infrastructure deal with GoTo, committing to retain its 7.5% stake.
  • China’s central bank measures led to Alibaba shares closing 10% higher, signaling strong market confidence.
  • Alibaba partnered with Mastercard and Cardless to launch a new credit card, benefiting small businesses.

Candlestick Chart

Live Update at 09:06:22 EST: On Tuesday, October 01, 2024 Alibaba Group Holding Limited American Depositary Shares each representing eight stock [NYSE: BABA] is trending up by 2.6%! Discover the key drivers behind this movement as well as our expert analysis in the detailed breakdown below.

Alibaba’s Financial Strength and Earnings Insights

Let’s dig into Alibaba’s performance and why its stock has been bustling. On track for a substantial shift upwards, JPMorgan reckons Alibaba’s fundamentals are shining bright post its Stock Connect inclusion. This news hints at a promising near-future for shareholders, likely propelling the stock higher over the next six to twelve months due to improved e-commerce operations.

Now, staggering as it sounds, Alibaba has rolled out more than 100 open-source AI models. Imagine Alibaba as a titan setting foot bravely into the AI realm, akin to a knight charging into a battlefield teeming with adversaries like Baidu, Huawei, Microsoft, and OpenAI. Their initiative here seems poised to not just make noise but seriously combat market rivals. From text-to-video AI tools to enhancing user experiences—Alibaba’s strategy appears both diverse and robust.

On the sunny side of deals, Alibaba has also sealed a five-year deal with GoTo, ensuring a stable association. It’s like getting into a contractual relationship where both parties vow not to let go—Alibaba won’t sell its 7.5% stake, ensuring continued growth in cloud infrastructure ambitions.

Let’s also revisit their cooperation with China’s central bank. Announcements aimed at boosting the domestic economy resulted in Alibaba shares soaring 10%, closing at $105.07. Such stock rallies often spark curiosity amongst market watchers. It’s similar to watching a marathon where one runner suddenly sprints ahead—catching everyone’s eye and changing perceptions at the blink of an eye.

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Lastly, Alibaba teamed up with Mastercard and Cardless to introduce a co-branded credit card. This move isn’t just about leveraging their market presence but also about weaving deeper ties with small businesses. These steps likely paved the way for more secure and diversified revenue streams.

Financial Stability and Key Ratios

Moving from events to numbers, Alibaba’s financial health underscores strong profitability and valuation measures. The key ratios show a mixed picture of prudence and areas needing attention. A key takeaway? Their debt-to-equity ratio stands firm, and the return on assets sits comfortably at 6.31%. This metric, similar to checking the pulse of a company, shows that Alibaba’s assets have been reasonably productive. They also report a pre-tax profit margin of 18.6% and a leveraged return on capital at an impressive 11.2%.

The latest earnings report sheds light on Alibaba’s financial landscape. With revenue at an astronomical 941.17B, Alibaba holds a commanding presence. The company’s book value per share (BVPS) stands ballooned at 409.79, tied to a PE ratio of 26.47—underlining that the stock, while relatively high-priced, reflects substantial growth potential. Now, consider their cash and cash equivalents at 571.03B, ensuring they can swiftly maneuver through uncertain market waters.

Alibaba’s Recent Performance Metrics:

In terms of recent performance, Alibaba’s stock at 108.88 represents a stellar bounce-back on Oct 1, 2024, which followed a dip to 106.12 on Sep 30. This fluctuation can exemplify a rollercoaster ride—it’s nerve-wracking but thrilling. Investors might feel a jitter but should see this as a testament to Alibaba’s resilience and its potential upticks.

The Impact of Alibaba’s AI Innovations and Collaborations:

Alibaba’s substantial AI leap roared through the markets, pushing its stock to shimmer even amidst tough competition. The release of 100+ open-sourced language models dots a sprawling battlefield, where Alibaba’s not just sending troops but armored knights against tech counterparts like Microsoft and OpenAI. It’s akin to Yahoo’s pivot in the ’90s, hoping fresh advances drive hefty user growth and eventual profitability.

Their partnership with GoTo, promising not to sell their 7.5% stake, signifies stability. This binding agreement forms a solid base for long-term growth in cloud services. Alibaba’s doubling down on cloud infrastructure mirrors the solidifying steps Amazon took with AWS, forming substantial revenue pillars carved out through early, smart investments.

Central bank welcome measures gave Alibaba’s stock an adrenaline shot, causing a significant 10% surge. It’s akin to strong government support that occasionally tilts market sentiment overwhelmingly positive. Investors saw value budding in the trees, propelling a buying spree.

The all-new credit card initiative brings an important dimension into Alibaba’s ecosystem. At a glance, it seems trivial; however, integrating finely-tuned financial tools like this with widespread commerce platforms creates ripe growth opportunities for small businesses. This nuanced financial mesh can awaken potential similar to how PayPal galvanized e-commerce payment methods.

Concluding Thoughts on Alibaba’s Stock Potential:

Seeing Alibaba in today’s market is witnessing a juggernaut reclaiming its momentum. Yes, they’ve had occasional stumbles; however, their strides reflect fundamentally sound, innovative strategies in AI and cloud, ready to set new benchmarks. From partnerships to central bank endorsements, Alibaba’s multifaceted approach makes it a worthy contender for those eyeing substantial returns.

So circling back to the question, is it too late to buy Alibaba stock? The manifold dimensions to their recent maneuvers indicate a robust underlying strength, paving avenues for impressive gains. Wise investors may very well see today’s prices as entry points standing at the brink of a realm brimming with potential.

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The available research on day trading suggests that most active traders lose money. Fees and overtrading are major contributors to these losses.

A 2000 study called “Trading is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors” evaluated 66,465 U.S. households that held stocks from 1991 to 1996. The households that traded most averaged an 11.4% annual return during a period where the overall market gained 17.9%. These lower returns were attributed to overconfidence.

A 2014 paper (revised 2019) titled “Learning Fast or Slow?” analyzed the complete transaction history of the Taiwan Stock Exchange between 1992 and 2006. It looked at the ongoing performance of day traders in this sample, and found that 97% of day traders can expect to lose money from trading, and more than 90% of all day trading volume can be traced to investors who predictably lose money. Additionally, it tied the behavior of gamblers and drivers who get more speeding tickets to overtrading, and cited studies showing that legalized gambling has an inverse effect on trading volume.

A 2019 research study (revised 2020) called “Day Trading for a Living?” observed 19,646 Brazilian futures contract traders who started day trading from 2013 to 2015, and recorded two years of their trading activity. The study authors found that 97% of traders with more than 300 days actively trading lost money, and only 1.1% earned more than the Brazilian minimum wage ($16 USD per day). They hypothesized that the greater returns shown in previous studies did not differentiate between frequent day traders and those who traded rarely, and that more frequent trading activity decreases the chance of profitability.

These studies show the wide variance of the available data on day trading profitability. One thing that seems clear from the research is that most day traders lose money .

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Citations for Disclaimer

Barber, Brad M. and Odean, Terrance, Trading is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors. Available at SSRN: “Day Trading for a Living?”

Barber, Brad M. and Lee, Yi-Tsung and Liu, Yu-Jane and Odean, Terrance and Zhang, Ke, Learning Fast or Slow? (May 28, 2019). Forthcoming: Review of Asset Pricing Studies, Available at SSRN: “https://ssrn.com/abstract=2535636”

Chague, Fernando and De-Losso, Rodrigo and Giovannetti, Bruno, Day Trading for a Living? (June 11, 2020). Available at SSRN: “https://ssrn.com/abstract=3423101”