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Saturday, 10 June 2017

Alibaba Group Holding Ltd (BABA) Stock Is the REAL E-Commerce Giant

Alibaba just announced massive expectations for full-year fiscal 2018 revenue growth, sending BABA stock up by double digits Thursday

Alibaba has been called the Chinese Amazon.com, Inc. (NASDAQ:AMZN). But especially in light of this morning’s news, I think that sentiment is selling the potential of BABA short — and I have a couple of ways to trade bullishly if you agree.

Yes, Amazon is currently much bigger than its
 Chinese counterpart, with a market valuation just shy of $480 billion compared to roughly $300 billion for BABA stock. What’s more, Amazon has been on a tear lately, dominating the U.S. e-commerce market and drawing in technical traders by the droves after topping the $1,000 mark.

But Alibaba has something that Amazon doesn’t have — access to Chinese consumers.
Stateside, we’re often lulled into complacency that the U.S. economy is the best. And, for now, that belief is holding true. But China’s economy has seen average  gross domestic product (GDP) growth of 6.5% for the past several years, compared to U.S. GDP growth that has barely topped 3% growth at the best of times since 2008.

What’s more, Alibaba has a considerable edge when it comes to China’s e-commerce market.  In the states, e-commerce is forecast to grow between 8% to 12% in 2017, based on Census Bureau data, putting the U.S. market at about $443 billion on the high side. Meanwhile, China’s e-commerce market hit $1 trillion last year and is expected to top $1.5 trillion in 2018.

You can see why Amazon really wants into China, but try as it might, the company has made little to no headway. BABA, meanwhile, is not only smack in the middle of the Chinese e-commerce revolution, but it already has its hooks in the U.S. market — those expanding there could take a bit more time, given the current political climate.

Given the rate of growth in the Chinese e-commerce market, Alibaba can afford to proceed at its leisure. With analysts forecasting average revenue growth of 40.1% over the next three quarters for
Alibaba, and Amazon anticipated to average 21.6% sales growth for the same period, it’s not a matter of if Alibaba will be bigger than Amazon, but when.

So, the question becomes “Do I buy BABA stock now?”

If you’ve got the right appetite for risk, the answer is a resounding yes. The problem, however, is that Alibaba stock is trading near all-time highs and is just shy of overbought levels. That said, BABA stock has been in this exact position since the beginning of April, and yet the stock continues to defy selling pressure and trek higher.

Luckily, you can use Alibaba options as insurance to mitigate the risks of a retreat while adding this red-hot Chinese e-commerce titan to your portfolio.

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