Alibaba Stock Goes Parabolic: Is It Turning A Corner?

Alibaba Group Holding Limited BABA shares have started 2022 on a firm note after grossly underperforming in 2021.

Alibaba Regains Momentum At Start Of Year: Alibaba got off to a strong start in 2022, gaining over 1% Monday before ending at $120.38.

This marked a turnaround for the stock, which ended 2021 at $118.79, down 49% for the year. Alibaba's problems stem from regulatory woes, as the Chinese government hounded big tech stocks to rein them in, and a softening fundamental outlook.

After a moderate pullback Tuesday, the stock rebounded on Wednesday, defying an across-the-board tech sell-off, dragged by rate hike fears. Most of Alibaba's Chinese tech peers also experienced weakness in the session.

Alibaba shares gained 4.51% Thursday, closing at $126.63. 

The session's high of $128.40 represents the stock's best level since it reached $129.45 on Dec. 7.

The recovery may be a purely technical move, given that not much has changed ever since the stock hit a low of $108.70 on Dec. 3. The oversold levels of the stock may have invited bargain hunters who are propping up the stock.

Earlier this week, a regulatory filing revealed that Warren Bufffett's right-hand man Charlie Munger's Daily Journal increased its stake in Alibaba from 302,060 to 602,060.

Related Link: Alibaba Vs. JD.com: Who's Winning The Chinese E-Commerce Battle?

What's In Store For The Future? Despite the pullback in Alibaba stock, the sell side has rallied behind it.

Out of 22 Wall Street analysts covering the stock, 19 have Buy ratings and the remaining three analysts rate the stock a Hold, according to TipRanks.

The average analysts' price target for the stock is $202.70, suggesting about 67% upside from current levels.

Alibaba's near-term fundamentals could take a hit from the ongoing softness in consumer spending in China, which is expected to be exacerbated by the resurgence of the COVID-19 pandemic. Nevertheless, most analysts concur the company's valuation is cheap when weighed against its medium- and long-term outlook. Apart from its flagship e-commerce business, the company is expected to benefit from its cloud business.

Alibaba's shares trade at a forward price-earnings multiple of 12.50 and price-to-sales ratio of 2.67. In comparison, U.S. e-commerce giant Amazon, Inc. AMZN has a forward P/E of 53.76 times and price-to-sales ratio of 3.86.

If the regulatory headwinds abate and the macroeconomic fundamentals do not deteriorate much, Alibaba could be in for a stronger 2022.

Related Link: Chart Wars: Alibaba, Baidu Appear Set For Rebound, But One Stock Looks Technically Stronger