Alibaba Group Holding Ltd. (NYSE: BABA) stock had fallen more than 43% in 2015 through September, but the stock has rebounded more than 25% in the last month.
That has investors wondering if they should buy Alibaba stock now...
Alibaba is preparing to report fiscal Q2 earnings on Tuesday, Oct. 27, and the company expects strong top and bottom line growth. Analysts forecast earnings per share of $0.32 on $3.35 billion in revenue. By matching those estimates, Alibaba will have grown EPS by 28% and revenue by 26.7% year over year.
Alibaba stock has been volatile following earnings in the past, and this quarter should be no different. If Alibaba misses either of those estimates, don't be surprised to see BABA shares start dipping again.
And if they do drop following Alibaba earnings, that will be an excellent buying opportunity.
Last quarter, Alibaba stock dropped as much as 8.2% after it reported revenue missed by just $130 million. It was a classic overreaction to Alibaba earnings. While revenue missed estimates, it still grew 28% year over year. Alibaba also beat EPS in the quarter and grew profits by 148%.
That's been the story with Alibaba stock since it hit the market. The impressive numbers it posts every quarter somehow fall short of investors' expectations.
At Money Morning, we've remained bullish on the long-term value of Alibaba stock throughout 2015 and continue to recommend long-term investors buy Alibaba stock.
And not just because we expect another solid quarterly earnings report. We see Alibaba becoming a global powerhouse in numerous industries...
Why We Recommend Investors Buy Alibaba Stock Now
Alibaba stock was up another 2.6% last week when the company announced the $3.6 billion purchase of the Chinese video streaming site Youku Tudou Inc. (NYSE ADR: YOKU).
It was just the latest in a string of acquisitions for Alibaba. In August, Alibaba spent $4.6 billion for a stake in the Chinese electronics chain Suning Commerce Group Inc. Over the past two years, BABA has purchased companies in numerous industries including entertainment, retail, tech, and even professional soccer.
It's part of Alibaba's plan to become more than just an e-commerce company. It's something that Alibaba Chairman Jack Ma shared with shareholders in a letter last week.
"Our key priorities for the next decade will be globalization, development of the rural economy and big data," Ma said. "At this historic time, Alibaba Group must embrace change, invest in change and drive change."
That vision for global growth is part of the reason Money Morning Executive Editor Bill Patalon recommends Alibaba.
"Alibaba's moves into entertainment, media, cloud computing - these are all part of a broad vision Jack Ma and his executive team has for Alibaba," Patalon said.
And he says that any pullback in the short term is not a major concern. Especially if you're wondering whether or not to buy Alibaba stock.
"I knew that, as a hot IPO, there was every chance the stock could - and probably would - sell off," Patalon said. "It's a 'transformational' type of company, meaning its leaders are 'planting seeds' right now that will have big future payoffs."
Patalon says you can't look at Alibaba as a short-term investment. This is the kind of stock you buy and hold for a long period of time. The company has its sights set on the long term.
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The Alibaba stock price was hovering around $75.50 on Friday afternoon.
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