Today's Alibaba (NYSE: BABA) Stock Price Gives Best Buy-In Point Since IPO

The Alibaba Group Holding Ltd. (NYSE: BABA) stock price hit its lowest level since its IPO this week when shares fell to $80.03 Tuesday afternoon.

BABA stock priceThat's down 14.8% from Alibaba's first-day closing price of $93.89. It's 33.3% from BABA's high of $120 hit on Nov. 10.

But this is not a bad thing. It means Alibaba stock is giving investors an excellent buying opportunity.

You see, several negative headlines caused nervous investors to dump their shares since January - even though the stories have been overblown.

Here are the three reasons BABA stock has dipped in 2015, and why it remains one of best long-term buys on the market now...

Three Reasons for the Alibaba (NYSE: BABA) Stock Price Dip

The most recent problem for BABA came Tuesday, March 3. That's when the Taiwanese government requested Alibaba withdraw from the country within six months because of its Chinese ownership.

Alibaba registered in Taiwan as a Singaporean company in 2008. It then registered in the United States as a Chinese company in 2014. Taiwanese officials claim that's a violation of the nation's investment laws.

Alibaba Group Holding Ltd. (NYSE: BABA) Stock

Recent Price: $85.45

Market Cap: $205.87 billion

Institutional Ownership: 18%

2015 EPS Estimate: $2.18

Operating Margin: 36.95%

Alibaba has roughly 100 employees in Taiwan and 140,000 registered users in the country.

Alibaba's Founder Jack Ma claims the company was in fact a Singaporean company when it registered in Taiwan, and that no foul play has occurred. He immediately vowed to resolve the issue.

"Taiwan is very important for Alibaba," Ma said. "As a global company, no matter where we go in the world, we need to comply with the local laws."

Prior to the Taiwan incident, Alibaba was in the news for a high number of fake purchases and fake products.

A Chinese government agency criticized Alibaba in January for its monitoring of unlicensed or "knockoff" goods. The agency expressed concerns over "the long-term existence of illegal problems regarding the management of transaction activity and other issues."

Similarly, the company caught flack for the amount of "fake ordering" that takes place on its site Taobao. These vendors lie about the number of transactions they handle in order to boost their ratings on the site. It's a problem that competitors like eBay Inc. (Nasdaq: EBAY) face as well.

Fake purchases don't directly impact customers or the company's bottom line, because no goods or money is being exchanged.

The unlicensed goods issue is one that needs to be addressed, says Money Morning's Executive Editor Bill Patalon. But every company has its issues. How a company handles its problems is the key.

"Every company has warts - there's no company that doesn't have problems," Patalon explained. "If you look closely enough at any company you're going to find issues. It's how you deal with the issues that determines whether you'll be a successful company or not."

The third problem for Alibaba in 2015 was its Q3 2015 earnings report from January.

Alibaba reported revenue of $4.2 billion. That was well below analyst estimates of $4.45 billion. BABA stock fell 11% after the announcement. But according to Patalon and Money Morning's Chief Investment Strategist Keith Fitz-Gerald, that was just another classic overreaction.

"Bottom line is the headlines read that 'Alibaba Missed Expectations.' The headlines should read 'Analysts Got It Wrong Again,'" Fitz-Gerald said after the earnings release. "Alibaba is a growth company and like other growth companies, quarterly numbers are almost meaningless."

But investors who focus too closely on these recent headlines will miss what Alibaba can deliver...

Now Is the Time to Buy Alibaba (NYSE: BABA) Stock

While January's revenue miss was a bearish sign, the company's revenue growth was actually bullish. The $4.2 billion revenue was 40% higher than the previous year.

And the rest of the company's financials were very bullish too.

Alibaba stock priceEarnings per share (EPS) was $0.81. Estimates called for EPS of $0.75. That's an 80% increase from last quarter. Gross merchandise volume (GMV) increased 49% in both Q3 and Q2.

Alibaba's user base is growing, too. Annual active buyers in Q3 reached 334 million. That's up 8.8% from the previous quarter, and 45% from the previous year.

The company also said mobile monthly active users hit 265 million. That's a yearly increase of 95%, and a 22% increase from last quarter.

GMV from mobile users hit $327 million. That's up 213% from 2013 and 64% from Q2. Now mobile users account for 42% of Alibaba's total GMV. It was only 35.8% in last quarter's report.

Alibaba's shift to mobile e-commerce is extremely important. Right now, the global mobile market is growing at a staggering rate.

According to the research firm Gartner, mobile payment transactions will grow by 35% annually through 2017. The global market for mobile payments will reach $721 billion by the end of 2017.

[epom key="ddec3ef33420ef7c9964a4695c349764" redirect="" sourceid="" imported="false"]

Money Morning's Technical Trading Specialist D.R. Barton was particularly interested in the firm's margins.

"Gross margins went from 50.5% last quarter to 58% this quarter," Barton said. "That's already the envy of almost everybody in the world."

"Those margins mean they can do a lot of things like invest in new marketing plans or in capital investments," he continued. "There's a lot you can do when you have those types of margins."

And those numbers - especially the mobile growth figure - show Alibaba stock's long-term potential.

"What you have to look at is the long-term potential, which is still huge," Patalon said. "They still haven't even maxed out their own market. They're bringing in entertainment companies and new business-to-business ventures. They're going to keep expanding their offerings."

Patalon points to Alibaba's closest peer, Amazon.com Inc. (Nasdaq: AMZN). In 1998, AMZN stock was worth less than $5 and was in a similar position. Now it's over $380 per share.

"Alibaba is a stock that you have to be willing to hold for a long time," Patalon said. "You don't just load up the truck with Alibaba stock and pray. You buy in and add to your position when there are pullbacks. This is a stock you want to hold for 10 to 15 years."

Said Fitz-Gerald: "To me, any long-term investor would be foolish to look at a pullback like this and not add to their position."

The Bottom Line: Alibaba has faced negative headlines about its operations in Taiwan, counterfeit purchases and products, and a revenue miss. But the company is positioned to weather these problems. Its EPS, margins, user growth, and mobile growth figures all point to growth for the Alibaba (NYSE: BABA) stock price.

Make More Money This Year, No Matter What the Market Does... You can make 2015 your wealthiest year in a few simple moves. You just need the three common investing habits to dump immediately, the single most effective strategy for your portfolio, and five stocks to get you started to a wealthier you. Get all of that right now in this exclusive guide...

Related Articles: