Alibaba Group Holding Ltd (NYSE: BABA) ended more than 10% down on Monday after Xi Jinping secured a precedent-breaking third term as the leader of China and handpicked members of the new Politburo Standing Committee.
How does that affect Alibaba Group?
Investors are concerned since that suggests minimal opposition to his policies that tend to prioritise “state” over the private sector.
Nonetheless, Boris Schlossberg (Managing Director at BK Asset Management) remains bullish on the Alibaba Stock and actually recommends buying the dip. Speaking on CNBC’s “Power Lunch”, he said:
Even the strongest of autocrats realise that profit comes from capitalism. And so, Xi Jinping wants to destroy one of the greatest brands in the world and strangle it completely? I don’t think so.
Schlossberg, however, agreed that it’s a highly speculative bet.
Alibaba stock is grossly undervalued
His constructive view is also predicated on “gross undervaluation”. Including the price action in response to today’s economic news, the Alibaba stock is now trading below the price at which it went public in 2014.
It’s so cheap that just any tiny incremental positive; loosening of COVID zero policy, less regulatory oversight from regime as long as they stay on business and not get involved in political posturing will give it enough breathing room.
From here, he sees as much as a 50% upside in shares of this Chinese multinational conglomerate.
Alibaba is expected to report its Q2 results in mid-November. Consensus is for it to earn $1.38 a share this quarter versus $1.29 a year ago.
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