Strategist On Alibaba: This Was A 'Fortunate Accident' For Traders

Alibaba Group Holding Ltd BABA shares are up more than 11 percent on Thursday, trading at new all-time highs after the company issued fiscal 2018 guidance calling for revenue growth between 45 and 49 percent. The new guidance came in well above consensus Wall Street expectations of 37 percent growth on the year.

But while Alibaba shareholders celebrate the surprisingly good news, others remain skeptical of Alibaba’s numbers.

"You just don't see that," TD Ameritrade chief strategist JJ Kinahan told Benzinga, referring to Alibaba's 45 percent revenue growth.

"It's one of the things I think that people have to be careful of when they invest in international stocks. When the whole world’s having trouble putting their finger on why something like this happens, it's why you really have to understand the business."

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In fact, Alibaba investors may have even more reason to question the company's numbers. The U.S. Securities and Exchange Commission has been investigating Alibaba’s accounting practices for over a year now. Last May, Alibaba disclosed that the SEC was looking into transactions between Alibaba’s Cainiao arm and other Alibaba affiliates, as well as its methodology for reporting sales from its "Singles' Day" event.

The investigation should serve as warning for Alibaba investors to look at the new revenue numbers with a critical eye.

"I think this is a great lesson for investors," Kinahan said. "Do you really understand how Alibaba makes money? Unfortunately it happens a lot. It's a lesson for domestic companies and certainly for international ones. If you don't know all the factors, you've got to be very careful."

"This is a fortunate accident I think for many people," Kinahan said.

At the same time, market skepticism could serve as a bullish catalyst for Alibaba as well, according to Amplify Investments CEO Christian Magoon.

"Once the stock gets past this [investigation], be it a good or bad outcome, I think we will see a relief for Alibaba," Magoon said back in November.

Despite the ongoing investigation, Alibaba shares have been red hot in the past year. The stock is now up 79.3 percent in the past 12 months.

Disclosure: The author is long BABA.

Image: Andy Mitchell, Flickr