Alibaba Group, the sprawling Chinese tech company, has been facing challenges on the U.S. stock market recently. The company’s stock has been underperforming market indexes, reflecting a lack of interest in Chinese titles among investors. However, according to a Morgan Stanley analyst, this could present an opportunity for investors to buy the stock at a discount.
The analyst, Gary Yu, has reiterated his equal weight rating on Alibaba stock with a price target of $85 per American Depositary Share (ADS), which represents a nearly 19% increase from the company’s recent closing price. Yu’s recommendation comes in light of Alibaba’s recent announcement of share buybacks, where it repurchased 524 million shares in the first quarter of 2024, spending $4.8 billion in the process.
Yu noted that this increase in buybacks is significant compared to Alibaba’s recent average quarterly spend on buybacks. He also highlighted that the company’s buyback and dividend yield would imply an 8% return on the stock.
Despite the analyst’s positive outlook on Alibaba’s stock price, the company has faced challenges in recent years, including the ongoing pandemic in China and government scrutiny over its power and influence. Additionally, Alibaba’s plans to split into six separate businesses add uncertainty to its future prospects.
While Yu sees potential for a price upgrade, some investors may remain cautious about investing in Alibaba at this time. The Motley Fool Stock Advisor analyst team, for example, did not include Alibaba in their list of the 10 best stocks for investors to buy now.
Investors are advised to carefully consider their investment decisions and conduct thorough research before investing in Alibaba Group or any other stock.
