Alibaba is a buy, this portfolio manager says

Shareholders of Alibaba (Alibaba Stock Quote, Chart NYSE:BABA) weren’t too pleased with the stock’s performance last fall, but the start to 2019 has been a different story. Is there more upside? Portfolio manager Darren Sissons says likely.

“It had a big sell-off over the fourth quarter but for those with higher risk appetites, you can buy it here. We have some in our system but it’s definitely not broadly held,” says Sissons of Campbell Lee & Ross to BNN Bloomberg last Thursday.

“Alibaba is effectively what started out as a logistics play for product online, because if you’ve ever been to China the population density is such that you need to get things delivered because you can’t go and drive two hours to go get them — it just doesn’t make sense,” he says. “The business is definitely flourishing and innovative and they’ve added different businesses on to make more money.”

Ahead of the company’s quarterly earnings due on May 15, Alibaba’s stock jumped in late January as the market responded to its fiscal third quarter, although revenues grew at their slowest pace in three years in response to a cooling Chinese economy. The e-commerce giant posted Q3 revenue of 117.28 billion yuan (or US$17.47 billion), which compared with 83 billion yuan a year earlier and stood close to analysts’ forecasts for 118.9 billion yuan. Net income of 30.96 billion yuan beat the Street’s estimate and showed year-over-year growth of 33 per cent.

Analysts have noted management’s more controlled spending as of late, even as the company spent a record 278.8 billion yuan or $41.6 billion in 2018 on product development, sales and marketing and general administration.

Alibaba’s share price grew by close to 150 per cent between mid-2015 and June of last year, when the stock reached a high of US$211.70. From there, the drop-off was steep, however, with BABA losing almost 40 per cent of its value before starting to turn things around in late December. Currently, the stock is up 37 per cent year-to-date.