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Why Alibaba remains a good choice of stock investment
The Alibaba Goup (BABA) stocks are currently trading at $214 which is significantly lower than their all-time high of $319 last October of 2020.
Their Q1 earnings report reflects that the core businesses of Alibaba continue to generate higher revenues and profit. All of the key metrics to consider are going up by double digits, like their revenue which went up by about 64% compared to last year's, which includes organic and inorganic growth. The recent acquisitions, which comprises the 24% was such a good decision that it reaped benefits for the company.
The only thing pulling Alibaba down is the recent big fine that they received from the State Administration for Market Regulation of the People's Republic of China. The fine was related to Alibaba showing monopolistic behaviour that, with their investigation, showed tactics to suppress competition.
A fine of about $2.8 billion was applied and caused Alibaba to report losses, which was rare as unlike the other fast growing companies, Alibaba does not typically release a report making the fine stand out and caused Alibaba to pull back down to the ground.
Though the fine was applied and losses were reported, it is but a small amount compared to the revenue Alibaba is generating. As such, the one-time expense is something that will not cause a long term threat to the company and its stocks.
Now let's take a look at the trend of the BABA stock. Currently, it is below the 200-day moving average, to be precise, about 18% below. And historically speaking, every time this happens, BABA would forge upward and perform really well. It may take 12 to 24 months, but the profits that we are looking at are relatively big.
All in all, Alibaba is currently down and missed its mark, but the stock has shown more than three times that whenever this happens, it's bound to bounce back stronger. So while the prices are low, traders may consider getting it for profits in the future. While trading entails risk, no rewards are granted without risks.
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