If you purchase shares of meta platform By late 2022, your investment could have more than doubled, or even tripled. Buying solid stocks when the market is too bullish can be a good move in the long run. For Meta, the recovery happened incredibly quickly.
One stock that could generate similar returns is: alibaba group holding (New York Stock Exchange: Baba). Tech stocks have struggled in recent years as investors worry about the impact of the Chinese government on business. The company owns stakes in more than a dozen Alibaba companies.
While this is a risk that investors should not ignore, Alibaba's size and prominence in China's high-tech and e-commerce markets, as well as its attractive long-term growth prospects, cannot be underestimated either. Let's take a closer look at why this stock is worth taking a chance on today.
Alibaba's business is diverse and expected to grow further
A big concern about Alibaba's business recently has been its lack of growth. Competition in China's e-commerce market is intensifying with the rise of the shopping platform Temu. PDD Holdings puts pressure on retailers around the world to compete with lower-priced products. But even amidst these challenges, Alibaba's business has been fairly resilient.
In the past three months of 2023, revenue from online shopping platforms Taobao and Tmall increased by 2%, according to the company's latest earnings report. And while e-commerce is Alibaba's core business, the company's overall business is diverse, which makes this a great investment.
For example, Alibaba's Cloud Intelligence Group accounts for more than 10% of segment revenue, and the company's Cainiao Smart Logistics Network is not far behind, accounting for just under 9% of revenue in the past quarter.
Although Alibaba faces headwinds due to China's economic slowdown, there is still plenty of potential for future growth. Joe Tsai, co-founder of Alibaba, believes that the level of e-commerce penetration in China will grow to more than 40% in the next five years. Currently it is around 30%.
Alibaba has the advantage of already being a large and established player in China's e-commerce market, which puts it in an excellent position to benefit from further growth in this space.
Stock valuation is incredibly attractive
In 2022, amid a sharp decline, Meta's stock price fell significantly, and at one point its price-to-earnings (P/E) multiple was just over 8x. The company's stock currently trades at more than 32 times earnings. However, Alibaba stock remains cheap, with a P/E ratio of just under 14 times. Alibaba shares have fallen 15% in the past 12 months, and the stock could fall further depending on China's relationship with China. The progress of the United States and the strength of the Chinese market.
Because of these unknowns and the geopolitical risks associated with investing in Alibaba, investors are picking up the stock at a discount. But for such a large technology company in the international and Chinese e-commerce market, there is a lot of value here.
Should you invest in Alibaba stock?
Alibaba is a very easy stock to buy given its current valuation, and has the potential to become one of the growth stocks to buy now. The growth of the Chinese market is far from over, and while there are concerns about the Chinese government's influence over the company, it shouldn't be a concern enough to deter long-term investors.
The potential upside for Alibaba stock could be significant. It was trading around $200 in 2020, and it wouldn't be surprising to see it return to that level in the long term.
Should you invest $1,000 in Alibaba Group right now?
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Randi Zuckerberg is a former head of market development and spokesperson at Facebook, sister of Meta Platforms CEO Mark Zuckerberg, and a member of the Motley Fool's board of directors. David Jagielski has no position in any stocks mentioned. The Motley Fool owns a position in and recommends Meta Platform. The Motley Fool recommends Alibaba Group. The Motley Fool has a disclosure policy.
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