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Alibaba Scores 24% Winning Streak as Low Valuation Lures Buyers

Shares of Alibaba Group Holding Ltd. have made an impressive recovery over the past week, after a lower-than-expected fine for Meituan added to a growing list of positive factors for the battered tech giant.
Bloomberg
By Bloomberg
12 Oct
After $260 Billion Slide, Alibaba Aims to Show the Worst Is Over A girl stands in front of a sign at the Alibaba Group Holding Ltd. headquarters in Hangzhou, China, on Saturday, May 8, 2021. Photographer: Qilai Shen/Bloomberg

The stock climbed 24% since hitting a record low in Hong Kong on Oct. 5 through Monday, after having “gotten very cheap,” according to James Cordwell, an analyst at Atlantic Equities LLP. Alibaba trades at 17 times forward earnings estimates, compared with a multiple of 25 for Tencent Holdings Ltd. and 39 for JD.com Inc. Tencent shares have gained 10% since a week ago.

The fine “led to some speculation that we are getting toward the end of some of the regulatory scrutiny the sector has been facing,” Cordwell said. Easing U.S.-China tension and signs of improvement in consumer spending over the Golden Week holiday are also positive developments, he added.

Alibaba shares have jumped 24% in the past four trading sessions

Analysts are encouraged by Alibaba’s climb beyond its 50-day moving average. The $469 billion e-commerce giant has no sell ratings, with 36 out of 38 analysts giving it a buy, according to Bloomberg-compiled data. They forecast shares to rise 45% over the next 12 months versus a 28% and 18% gain for Tencent and Meituan, respectively.

Investors may also be thinking “it’s time to reassess the stock” ahead of Alibaba’s quarterly earnings release, Cordwell said.

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