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Alibaba Stock Is Surging. 5 Reasons Investors Are Buying the Dip.

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Alibaba

shares have had an excellent week because the stock looks cheap and investors are buying the big dip.

After losing almost 50% of its value in 2021—amid intensifying regulatory pressures and concerns around slowing growth—shares in the Chinese tech giant have climbed more than 9% since the start of 2022. That surge comes even as peers in U.S. tech have tumbled alongside rising bond yields and indications of tightening monetary policy.

That outperformance was on track to continue Friday, with the U.S.-listed stock of Alibaba (ticker: BABA) finishing up 2.5%. The company’s Hong Kong-listed shares (9988.H.K.) surged 6.5% in Asian trading.

Danny Law, an analyst at Guotai Junan Securities—one of China’s biggest investment banks—told Barron’s he sees five factors behind the recent turnaround for Alibaba. In short, investors are buying the stock because it may have finally hit rock bottom.

Current valuation is the first reason cited by Law for Alibaba’s recent outperformance. It’s looking cheap, especially because the company is a clear market leader in Chinese e-commerce.

Sentiment around valuation in Chinese equities more broadly has been echoed by strategists at Goldman Sachs. “Are valuations really attractive? Yes,” wrote a group led by Kinger Lau in a report. “Index valuations (12x) are at recent-year lows and at significant discounts to global equities.”

Law also said that the move into Alibaba by high-profile fund managers—like




Berkshire Hathaway

(BRK.A and BRK.B) Vice Chair Charlie Munger—was catching the eye of other investors, who were following suit. Munger’s Daily Journal (DJCO) recently doubled down on Alibaba stock for the second quarter.

The regulatory picture, which dogged Alibaba last year, also seems to be getting clearer, Law said. Alibaba and other Chinese tech giants found themselves on the wrong side of regulators as President Xi Jinping tightened his control over China’s economy. Finally, investors may have accepted the expectation of continuous supervision by regulators, according to Law.

Lau and his team at Goldman agreed. “Is the worst of regulation tightening behind us? We think yes, in terms of its intensity, and the risks seem well priced per our indicators,” the strategists said about Chinese equities at large. “Policy clarity is also improving.” 

Another factor driving investors into Alibaba stock this week could be a major sale of assets by peer Tencent, Law said, which have weighed on the shares of that company and could have pushed some to shift into Alibaba. The momentum of positive sentiment from the company’s investor day last month may be another factor behind buying, according to Law.

All of these factors, he said, “may help to boost the company’s share price in the short term.”

His view—especially the notion that Alibaba looks cheap, and that the regulatory picture is getting clearer—is also shared by others.

“The stock is rebounding on very attractive valuation,” Xiaoyan Wang, an analyst at Chinese investment group 86 Research, told Barron’s. “Investors are also expecting much fewer negative headlines on regulatory front in 2022.” 

But there remains reasons to be cautious.

“For the longer term, the policy risk and the economic downturn risk are still highly uncertain,” Law said. “Both might make impacts on the company’s operations, as well as its growth outlook.”

Earlier this week, analysts at investment banking firm Benchmark cut their target price on Alibaba shares, citing a potential hit to revenue from slowing Chinese consumer spending. 

Analysts led by Alex Yao at JPMorgan Chase said the same thing Thursday, trimming the target price for Alibaba to $180 from $210 on growing caution about Chinese online consumption. 

Like the group at Benchmark, Yao’s group sees risks to customer management revenue (CMR), which comes from services like marketing on Alibaba’s platforms and is a crucial source of sales for the company. 

“A deteriorating CMR outlook will make the stock vulnerable until the market identifies an inflection point in earnings revisions, in our view,” the team at J.P. Morgan said. “We think the stock will continue to be under pressure in the near future, despite low valuations.”

Yet the group at Benchmark maintained its Buy rating on the stock, and J.P. Morgan kept Alibaba at its Overweight rating, as have dozens of analysts whose estimates are captured by FactSet data. The average target price for Alibaba among this group is $195.51, which implies more than 54% upside from the closing price Thursday.

In the background, the prospect simmers below the surface that U.S.-listed Chinese companies like Alibaba may be pushed by regulators to lose their listings in New York.

Delisting can pose a serious issue for stockholders—especially individual investors—and as Barron’s reported last summer, many fund managers have opted to switch to Hong Kong listings.

“Is China investible? We’d say Yes, especially for investors whose investible universe goes beyond the ADR market where forced delisting remains a risk,” the group at Goldman said.

Write to Jack Denton at jack.denton@dowjones.com

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Teladoc Tumbled 38% After Big First-Quarter Loss. Is It Just a Pandemic Play?

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After pandemic drop, Canada’s detention of immigrants rises again By Reuters

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© Reuters. FILE PHOTO: Two closed Canadian border checkpoints are seen after it was announced that the border would close to “non-essential traffic” to combat the spread of novel coronavirus disease (COVID-19) at the U.S.-Canada border crossing at the Thousand Isla

By Anna Mehler Paperny

TORONTO (Reuters) – Canada is locking up more people in immigration detention without charge after the numbers fell during the pandemic, government data obtained by Reuters shows.

Authorities cite an overall rise in foreign travelers amid easing restrictions but lawyers say their detained clients came to Canada years ago.

Canada held 206 people in immigration detention as of March 1, 2022 – a 28% increase compared with March 1 of the previous year. Immigration detainees have not been charged with crimes in Canada and 68% of detainees as of March 1 were locked up because Canada Border Services Agency (CBSA) fears they are “unlikely to appear” at an immigration hearing, according to the data.

The rise puts Canada at odds with Amnesty International and other human rights groups that have urged Ottawa to end its use of indefinite immigration detention, noting CBSA has used factors such as a person’s mental illness as reason to detain them.

A CBSA spokesperson told Reuters that “when the number of entries (to Canada) goes up, an increase in detention is to be expected.” CBSA has said in the past it uses detention as a last resort.

A lawyer told Reuters her detained clients have been in Canada for years.

In the United Kingdom, too, immigration detention levels rose last year after dropping earlier in the pandemic, according to government statistics. Unlike Canada, the United States and Australia, European Union member states have limits on immigration detention and those limits cannot exceed six months.

The rise in detentions puts people at risk of contracting COVID-19 in harsh congregate settings, refugee lawyers say.

Julia Sande, Human Rights Law and Policy Campaigner with Amnesty, called the increase in detentions “disappointing but not surprising,” although she was reluctant to draw conclusions from limited data.

The number of immigration detainees in Canada dropped early in the pandemic, from a daily average of 301 in the fourth quarter (January through March) of 2019-20 to 126 in the first quarter (April through June) of 2020-21.

FEW NO-SHOWS AS DETENTIONS DROPPED

Detaining fewer people did not result in a significant increase in no-shows at immigration hearings – the most common reason for detention, according to Immigration and Refugee Board data.

The average number of no-shows as a percentage of admissibility hearings was about 5.5% in 2021, according to that data, compared to about 5.9% in 2019.

No-shows rose as high as 16% in October 2020, but a spokesperson for the Immigration and Refugee Board said this was due to people not receiving notifications when their hearings resumed after a pause in the pandemic.

Refugee lawyer Andrew Brouwer said the decline in detention earlier in the pandemic shows Canada does not need to lock up as many non-citizens.

“We didn’t see a bunch of no-shows. We didn’t see the sky fall … It for sure shows that the system can operate without throwing people in jail,” Brouwer said.

He added that detainees face harsh pandemic conditions in provincial jails – including extended lockdowns, sometimes with three people in a cell for 23 hours a day.

Refugee lawyer Swathi Sekhar said CBSA officials and the Immigration and Refugee Board members reviewing detentions took the risk of COVID-19 into account when deciding whether someone should be detained earlier in the pandemic but are doing so less now.

“Their position is that COVID is not a factor that should weigh in favor of release,” she said.

“We also see very, very perverse findings … [decision-makers] outright saying that individuals are going to be safer in jail.”

The Immigration and Refugee Board did not immediately respond to a Reuters request for comment.

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Nasdaq futures rise as market attempts comeback from April sell-off, Meta shares soar

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Stock futures rose in overnight trading as the market shook off the April sell-off and investors reacted positively to earnings from Meta Platforms.

Futures on the Dow Jones Industrial Average added 70 points or 0.2%. S&P 500 futures gained 0.7% and Nasdaq 100 futures jumped 1.2%.

The moves came as shares of Meta surged more than 18% after hours following a beat on earnings but a miss on revenue, a sign that investors may see signs of relief in the beaten-up tech sector. Shares were down 48% on the year heading into the results.

Meanwhile, shares of Qualcomm gained 5.6% in extended trading on the back of strong earnings while PayPal rose 5% despite issuing weak guidance for the second quarter.

“I think a lot of people want to believe that earnings are going to pull us out of this, but earnings are not what got us into this,” SoFi’s Liz Young told CNBC’s “Closing Bell: Overtime” on Wednesday. “… But the reality is there are so many macro headwinds still in front of us in the next 60 days that the market is just hard to impress.”

The after-hour activity followed a volatile regular trading session that saw the Nasdaq Composite stoop to its lowest level in 2022, as stocks looked to bounce back from a tech-led April sell-off. The index is down more than 12% since the start of April.

In Wednesday’s regular trading, the tech-heavy Nasdaq ended at 12,488.93, after rising to 1.7% at session highs. The Dow Jones Industrial Average rose 61.75 points, or 0.2%, to 33,301.93 propped up by gains from Visa and Microsoft, while the S&P 500 added 0.2% to 4,183.96.

Investors await big tech earnings on Thursday from Apple, Amazon and Twitter, along with results from Robinhood. Jobless claims are also due out Thursday.

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