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The Alibaba stock price is up 12.5% in the last month, while the Dow Jones and S&P 500 are up just 3.9% and 3.4% in the same time, respectively.
And we think the Alibaba stock price has even further to climb in 2016. But before we get into that, here's why BABA stock is climbing this month...
Shares of Alibaba Group Holding Inc. (NYSE: BABA) rallied as markets rebounded from early 2016 dips. Over the last two weeks, U.S. investors have sent the markets higher following encouraging news of increased consumer spending, higher construction spending, and an improving manufacturing sector.
And many investors started heading back into beaten-down stocks like Alibaba stock. The Alibaba stock price had dropped more than 17% in the month of January alone.
A key reason for jittery markets this year is a slowdown in China, the world's second-largest economy. In January, China reported 2015's GDP was 6.9%. That was the lowest rate in a quarter century. And it has also had a major impact on the Chinese stock market, down some 47% since last summer's peak.
Since Alibaba is a Chinese company, investors have panicked throughout 2016 that the decelerating Chinese economy will have a major impact on Alibaba's business. Even with this month's rebound, the Alibaba stock price is still down 12.2% year to date.
But most investors are missing the point. Alibaba may be Chinese company, but it's morphing into a global brand.
Last week, reports emerged that Alibaba is in talks with a number of banks to borrow up to $4 billion. The money will be used for expansion plans, including acquisitions. The sizable loan is expected to be finalized in the next month.
The news isn't exactly a surprise to Money Morning readers...
Alibaba has been actively taking stakes and buying companies around the globe, which we've been closely following. The company has also been venturing into areas outside of retail, such as online video and local services.
In mid-February, Alibaba bought 33 million shares of daily deals site Groupon Inc. (Nasdaq: GRPN). The purchase gives Alibaba a 5.6% stake in Groupon, as well as a vast reach in the growing online commerce marketplace that connects merchants to consumers.
In November, Alibaba announced it would make online video provider Youku Tudou a wholly owned unit. In June, Alibaba and its financial-services affiliate said they would collectively invest approximately $1 billion in food-ordering app Koubei to develop its offering and services within the dining arena.
All of these moves show Alibaba's commitment to becoming a global brand. And best of all, Alibaba stock will continue to benefit from incredible growth in its traditional market. It's a market that reached a value of $2.5 trillion in 2015...
Alibaba Stock Price Will Soar from This $2.5 Trillion Market
Through its subsidiaries, BABA operates as an online and mobile commerce company in its home base of China and internationally.
Technology is vastly changing shopping habits in China, the world's second-largest economy. Alibaba is leading the charge with its online payment platform Alipay.
A decade ago only 7 million people in China had a credit card and almost all transactions were made via cash. Last year, 358 million Chinese, or roughly half the country's Internet users, used mobile devices to shop and make payments.
Analysts estimate Chinese consumers used their mobile devices to send payments and transfers totaling $2.5 trillion last year, double the amount the year before.
With shares trading just a few dollars above its September 2014 IPO price of $68, Alibaba stock is oversold.
Alibaba Chairman Jack Ma and Vice Chairman Joe Tsai appear to share that sentiment. The company said Monday the two have signed an agreement to use their private funds to buy back some $500 million (collectively) in Alibaba stock as part of a $4 billion stock repurchase program announced in August.
Thirty-two analysts rate Alibaba a "Buy." Three have an "Overweight" rating on the stock, and four maintain it a "Hold." Just one analyst rates Alibaba stock "Underweight." None rate shares a "Sell," according to data from The Wall Street Journal.
- Reuters: Alibaba and Two Executives Buy Back $500 Million in Shares
- The New York Times: U.S. Stocks Take Small Losses, Kroger, Costco Sink