Please ensure Javascript is enabled for purposes of website accessibility

The BABA Stock Rally Hits the Accelerator

BABA stock has been on a tear all year. After Thursday’s sales guidance surprise, it’s officially in overdrive. How long can the rally in BABA last?

Entering last week, Alibaba (BABA) was already a booming stock. Now it’s an exploding one: BABA stock was up more than 8% last week after the company once again soundly exceeded fiscal first-quarter earnings expectations.

Here were some of the highlights from Alibaba’s stellar earnings report:

  • 56% year-over-year sales increase
  • Reiterated full-year sales growth of between 45% and 49%
  • The 50.1 billion yuan in revenue it pulled in outpaced the 47.7 billion yuan analysts estimated
  • 96% growth in its burgeoning cloud business, with paying customers exceeding one million for the first time

[text_ad use_post='129628']
The resulting big move in BABA stock was the latest for a stock that has been soaring all year. As of this writing, Alibaba stock is up more than 92% in 2017.

BABA stock has nearly doubled already this year.

If you’re a Cabot Global Stocks Explorer subscriber, your gains in BABA are almost as impressive.

Paul Goodwin, our resident emerging markets stock expert and Cabot Global Stocks Explorer chief analyst, recommended BABA stock to his subscribers on January 27, when it was trading at 102 (it’s now up to 169!). Those who took Paul’s advice are currently sitting on about a 66% gain in seven months!

Here’s what Paul wrote about Alibaba back in January:

“In the long run, Alibaba is likely to be a winner. After all, it has scale, and sufficient free cash flow to allow it to build market share in business lines without worrying about earnings. That’s one benefit of having $20.6 billion in cash on hand.

“BABA has been in the portfolio before, with its latest stint running from August to November 2016. We exited the position with a small profit when the stock was about half-way through a three-month correction. That correction, which pulled BABA from near 110 in September to 86 in late December, gave way to a new rally in January. BABA lifted to 96 on January 10 and consolidated in a narrow band leading up to the earnings report.

“Since the report, BABA has run back above 100 on excellent volume, with today’s pullback providing a useful entry point. With support from improving attitudes toward emerging market stocks in general and Chinese ADRs in particular, we think BABA is a good buy here.”

Great call, Paul! At the time, Alibaba had just reported strong third-quarter earnings. Things have only gotten better since: earnings per share expanded 83% in the most recent quarter in addition to the 56% sales jump. If the company can reach the high end (49%) of its own expected sales growth this year, it would be its best top-line jump since 2014.

Chinese stocks as a group have performed quite well since May. But few Chinese stocks can match the returns in BABA. With more growth ahead, there’s no reason to expect the stock to slow anytime soon.


Chris Preston is Cabot Wealth Network’s Vice President of Content and Chief Analyst of Cabot Stock of the Week and Cabot Value Investor .