This “Must Own” Stock is a Buy — Even Near All-Time Highs

Like many holidays, Singles Day in China has morphed into a massive moment of commerce heavily promoted by Alibaba Group Holding Ltd. (NASDAQ: BABA).

In fact, it’s become the biggest shopping day in the world.

The 2019 version of Singles Day was another record-breaker. In 24 hours, more than $38 billion was spent over Alibaba’s network of e-commerce sites.

By comparison, the five days after Thanksgiving (including Black Friday and Cyber Monday) managed a total of $25 billion in sales last year.

The American equivalent to Singles Day, Cyber Monday, generated $8 billion in sales in 2018.

There is nothing like Singles Day anywhere.

And that’s why Alibaba stock remains a “must own” even with shares near all-time highs.

Money Morning Executive Editor Bill Patalon has been spot-on with Alibaba for years.

In fact, he’s been calling the company one that can build “generational wealth” since before the IPO in 2014.

He’s right about that.

Singles Day sales alone increased by 27% in 2019. Some thought 2018 was a peak. Clearly, it was not.

And this year won’t be the peak either.

That’s what makes Alibaba a stock that can build generational wealth.

In 2019 alone, BABA is up 35%, compared to 24% for the S&P 500.

Every step of the way, Alibaba is reaching a new high.

Naturally, it can be intimidating buying a stock near its high. But Alibaba is still a stock to buy today, even at $184 per share.

What matters more than the price of Alibaba shares is the fundamentals of the stock.

Just because shares trade for a really high price doesn’t mean shares can’t go higher.

If sales and earnings are growing rapidly, the likely direction of a stock is up.

In the case of Alibaba, shares are nowhere near fully valued.

Here are the exact numbers that show me Alibaba stock has much higher to run…

Why Alibaba Stock Is Still a Buy and Hold Now
Analysts expect the company to grow profits by 24% from this year to the next.

Not many companies deliver such growth.

At current prices, Alibaba shares trade for 26 times 2019 estimated earnings. Full value would assume a much higher multiple, likely above 50 times.

Alibaba’s sales are fast approaching $100 billion. It seems like an insane number, but not really when put in terms of China’s vast economy.

According to Patalon, “two-thirds of ‘real GDP’ ($114 trillion) is due to China and emerging Asia.”

One hundred billion dollars is only a fraction of that total GDP, giving Alibaba plenty of room to grow significantly in the future.

And that’s only domestic growth potential for Alibaba. The world economy adds even more to the total prize down the road.

Roughly 500 million people participated in this year’s Singles Day from a number of countries, not just China.

As the holiday spreads, so too will Alibaba’s reach beyond China.

How has any of this been possible given the trade war with America?

For many companies in China, tariffs are a real problem.

But not for Alibaba.

The Internet has no borders, so even if the trade dispute continues for longer than many expect, Alibaba should do just fine.

There is simply no stopping this company, and that is why it is a must-own stock.

Plus, there’s more to the company than just retail sales over the Internet.

The company is in cloud computing, digital payments, healthcare, and artificial intelligence.

It is perfectly reasonable to assume that Alibaba will dominate these markets just as it is doing in the online business.

But it all comes back to the size of the Chinese economy compared to the current size of Alibaba.

There is far more growth here than the market is considering at present.

The current share price should be no deterrent.

What matters is future growth, and Alibaba has a ton of it coming down the road.

— Jamie Dlugosch

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Source: Money Morning