Why the Alibaba Stock Price Will Climb Despite Slow Holiday Sales

On Cyber Monday, the Alibaba stock price was up over 1.60% in mid-afternoon trading, despite Cyber Monday's limited appeal outside of the United States.

Cyber Monday sales totaled $2.65 billion in the United States, according to Adobe. But Alibaba Group Holding Ltd. (NYSE: BABA) has recorded massive sales in 2015 without the aid of the American shopping holiday.

You see, the rise or fall of the Alibaba stock price isn't connected to Black Friday or Cyber Monday.

In China, there is a shopping holiday known as "Singles' Day," which is essentially a spin-off of our Valentine's Day. It's the biggest day of the year for shoppers in China, and the biggest day of the year for Alibaba...

According to Forbes, Alibaba sold 57.1 billion yuan ($9.3 billion) in goods on Singles' Day in 2014. In 2015, Bloomberg reported that Alibaba recorded 91.2 billion yuan ($14.3 billion) in sales. That means Alibaba alone reported $6.65 billion more in sales on Singles' Day 2014 than the sales total of all American companies on Cyber Monday 2014.

The impressive increase for Alibaba is due to the vision of Alibaba's Executive Chairman, Jack Ma. Similar to Amazon.com Inc. (Nasdaq: AMZN), Alibaba has expanded itself as a leading provider of goods and services across a plethora of industries.

In early November, Alibaba announced it would buy the Chinese video site Youku Tudou Inc. (NYSE ADR: YOKU) for $3.6 billion dollars. Youku is known as the "Chinese YouTube" and boasts 580 million users, according to digital marketing company DMR.

Of course, the purchase of Youku was part of an even bigger plan to drive sales and increase revenue for Alibaba...

Part of the appeal of Youku for Jack Ma was that it houses well-known Chinese video bloggers. These bloggers already have a built-in audience, and Alibaba can promote its online retail site, online storefronts, and other services through these personalities.

These investments provided Alibaba with the 32% year-over-year revenue growth it announced in its last quarterly earnings report on Oct. 27.

The Alibaba stock price is up slightly today. But more importantly, Money Morning Executive Editor Bill Patalon believes that BABA stock "will have big future payoffs" for years to come...

The Alibaba Stock Price Will Continue to Exceed Expectations

According to Patalon, BABA is a "legacy" stock that will provide positive long-term returns.

Since 2013, Alibaba has purchased companies in a variety of industries, including retail, entertainment, tech, and even a professional soccer team.

"It's a 'transformational' type of company, meaning its leaders are 'planting seeds' right now that will have big future payoffs," Patalon said.

And the company is more than just an e-commerce firm. You see, Alibaba is now trying to disrupt the Chinese banking system...

In 2004, Ma identified several flaws with Chinese banking practices. In order to help Chinese residents avoid middlemen, Alibaba created China's first customer-to-customer payment system. Known as Alipay, this system was soon processing nearly 50% of Chinese e-commerce transactions.

Several years later, Alibaba opened a money market product in 2013. Alibaba's money market product, Yu'e Bao, reported 100 million opened accounts a year after its launch.

BABA stock is an attractive addition to portfolios because of Ma's ability to identify a problem, find a solution, and make money from the solution.

But because the company is investing heavily for the future, Patalon warns that this not a stock for short-term investors.

Over the last 52 weeks, the Alibaba stock price has a range of $57.20 to $113.23. That volatility was caused by the extensive hype that surrounded the Alibaba IPO...

"I knew that, as a hot IPO, there was every chance the stock could - and probably would - sell off," Patalon said.

But investors who sold the stock in a panic have missed out on gains. Even with the wild fluctuations in the Alibaba stock price, BABA stock is up 19.85% on the year from its IPO price of $68.

Investment research firm Zacks changed its "Hold" recommendation to a "Buy" on Nov. 2, and set a price target of $94. Investors need to be patient with Alibaba, but the long-term payoff will be well worth the wait.

Jack Delaney is an associate editor for Money Morning. You can follow him on Twitter and follow Money Morning on Facebook.

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