In recent times, Chinese stocks have experienced a decline in popularity, partially attributed to factors like the “Trade War.” Although occasional headlines still suggest strains in US-Chinese relations, this doesn’t mean these stocks should be disregarded. Quite the opposite, as some of these equities are displaying promising signs of substantial growth.
One remarkable example of this trend is Alibaba (NYSE:BABA), the renowned Chinese e-commerce behemoth. Alibaba Group Holding Limited, along with its subsidiaries, offers technological infrastructure and expansive marketing capabilities that enable businesses, brands, retailers, and merchants to effectively engage with their user base and customers within China and globally. The company’s operations are divided into seven distinct segments: China Commerce, International Commerce, Local Consumer Services, Cainiao, Cloud, Digital Media and Entertainment, Innovation Initiatives, and Others.
Presently, Alibaba holds a Zacks Rank #1 (Strong Buy) within the Internet – Commerce industry, positioning it in the upper quartile of the Zacks Industry Rank. This favorable ranking stems from a sequence of positive adjustments in earnings estimates from financial analysts on Wall Street. Over the past 30 days, two analysts have upwardly revised their earnings projections for both the current and upcoming years. These optimistic adjustments have propelled the Zacks Consensus Estimates upwards, reaching $9.16 for the current year (from an initial $7.81) and $9.96 for the following year (up from $8.61).
This upward trajectory translates to an impressive forecast of 15.37% growth in earnings per share for the ongoing year and an additional 8.73% for the subsequent year. Simultaneously, revenue growth is anticipated to reach 4.97% this year and an even more robust 8.95% next year. Such substantial growth projections might typically correspond with elevated valuations. However, this isn’t the case with Alibaba. The forward price-to-earnings (PE) ratio for Alibaba currently stands at a modest 9.67x earnings, notably lower than the industry’s average of 18.6x earnings and the broader market’s 20.5x.
As the spotlight shines on Alibaba (NYSE:BABA) with its promising growth trajectory and appealing valuation, the prevailing sentiment is that Chinese stocks still hold potential despite the occasional geopolitical uncertainties.
Featured Image: Megapixl @ Drserg
