I invested $166,000 (SGD) in Alibaba (BABA, 9988.HK) during the past two months. The current value of my stock is $166,000. My loss (realized an unrealized) is $23,000 or 13% of my invested sum.
Alibaba stock price dropped 29% from a high of $319 to $228 USD due to the following factors:
1) Suspension of IPO of Ant Financial
2) Draft anti-monopoly law presented by the government
3) The government investigated Alibaba for possible monopolist practices
4) Report that the founder Jack Ma had been missing from public view for the past three months
5) Possible delisting of Alibaba from the US exchanges in 3 years time, if it does not conform with US audit requirements.
I view that all these measures are temporary and will be sorted out over the next six months.
I will hold my existing position (and maybe add more due to the under-valuation).
The current price earning ratio of BABA is 24.42 compared to 91.05 for Amazon (AMZN). Both companies have strong business fundamentals. BABA is undervalued by 73% compared to AMZN.
The average 1 year price target for BABA is $330. This is 44% higher than the current price. I think that this target is realistic.
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