hey everyone welcome to bald guy money i'm not going to take you through the whole spiel but i will tell you that i am bald guy let's talk money in this video i want to share with you a stock play i am making right now i think is going to yield fantastic returns over the next 12 months and that is alibaba okay as of today the new york stock exchange traded stock is trading for 150 eighteen cents per share which is fifty three percent lower than its all-time high of three hundred nineteen dollars and thirty two cents


per share per share from back in october twenty twenty but in this video we will explore the fundamentals of china's online retail giant why it's dropped so much recently and i will illustrate to you exactly why i think it is a stock to buy in addition i will also reveal some famous investors who agree with me nothing new there and uh just please remember that none of this is financial advice please make sure to do your own research and don't forget to hit the like button comments and likes really help me reach


a wider audience so if you're a fan please drop me a like that helps the algorithm get it out there to more people appreciate it so now that that's out of the way let's talk about alibaba i am saying alibaba stock is a buy in fact i think it's an amazing deal right now just take a look at the stock performance in this chart as you can see alibaba hasn't been this cheap since january 2019 but why what happened that investors have soured on alibaba well a lot of that starts with this guy


jack ma founder of alibaba an all-around wild man who has built a celebrity so large that it's actually rivaling that of the communist party of china and its leader xi jinping the details aren't really important but ma's behavior is generally seen as an affront to the communist party ideals but the consequences of his larger than life persona have actually impacted the company in tangible ways and here they are number one is that the chinese government in early 2021 issued a 2.8 billion dollar fine for


what they called anti-competitive practices but a lot of people speculate that it was actually issued because of some things that were kind of against government policy that jack ma said in addition to that 15.5 billion dollars has been pledged as a contribution to china's common prosperity by alibaba which will come out of its profits at some point in time which actually some point in time is by the end of 2025. in addition to that tax tax subsidies for tech companies have ended in china or are actually in the


process of ending which will put the effective tax rate for a company like alibaba from 10 all the way up to 20 now to be fair points two and three are likely totally independent of jack ma and more a move by china trying to get back to its communist roots which has pulled down the entire chinese stock market and this has also included restrictions on gaming gambling and other behavior that's considered to be counterproductive and this is not even to mention the evergrand crisis which i'm sure many of


you have heard about and this is seems to be a big fire but the chinese government has resolved to actually put it out so that's a big relief but none of that actually matters at the end of the day because the company itself alibaba is just fine and has a very good future ahead of it let's explore the financials first here i have highlighted the most important things i look at when analyzing the fundamentals of a company the first is the p e ratio which measures the price of the stock versus annual earnings


this indicator is still fundamental in determining whether or not a company is undervalued or overvalued and despite changes in the attitudes towards p e ratios over the last few years due to fast-growing tech companies making the p e ratio a less important metric i still use it to benchmark versus the market average and similar companies to determine whether or not a stock is undervalued or overvalued for alibaba what i want to point out is that its current p e ratio of 17.9 is 53 lower than the market average of 37.8


37.8 being really rather high it is also nine percent lower than the historical s p 500 average of 19.6 and what is actually really crazy is that it's a whopping 70 lower than amazon which has a p e ratio of 59.7 these numbers alone indicate that alibaba is likely currently undervalued but to firmly determine that we have to look at the financial health of the company that's why the next thing i check is the company's total debt to asset ratio this helps me determine how leveraged the company is and whether or not i need


to worry about possible financial issues down the road for alibaba when we divide their total debt by their total assets we get a number of 0.09 which shows that the company is financially well off as it has a low amount of debt for example amazon which is also very well off has a higher ratio at 0.34 showing us that amazon is even more leveraged than alibaba or that alibaba is simply carrying less debt than amazon finally i look at the ttm ebitda or the company's earnings before interest taxes depreciation and


amortization over the trailing 12 months now if you're not familiar with any of these terms keep my video going open up another tab and look them up they are key for amateur investors to understand because what this number is is an indicator of its potential future financial performance and compared directly to that of the benchmark amazon as you can see in this image you can see here that the market valuation gap between the two companies is a larger than the ebitda gap and by determining the ratios between


these two numbers i can determine what i think the current discount on alibaba's stock price is right now by dividing the market cap ratio by the ebitda ratio and then i multiply it by the current stock price to determine what a fairer valuation of alibaba is versus amazon and here's what that looks like you can see that i estimate the discount on alibaba stock to be about 39 meaning i expect the price of alibaba to appreciate at least 39 percent up to about 209 dollars per share versus the


150 per share today once fears towards the chinese stock market settle down and please keep in mind this is not advice but i am personally increasing my position in alibaba as a result of this analysis and i am not the only one doing so both ray dalio and the legendary charlie munger of berkshire hathaway agree that alibaba is an amazing opportunity charlie munger so much so that his average price paid for the stock is reported to be just above 200 if that tells you anything but hey don't take our word for it take


a look at some of these interesting stats i found about alibaba online and as always links to my sources are in the description let's check them out so 65 of all chinese e-commerce sales are made via alibaba in addition to that 69 of the value of e-commerce sales are done via alibaba and that's data from 2020. i got that from goldman sachs the second point 2020's singles day sales volume for aliexpress was worth a whopping 74.1 billion dollars and if you're familiar with singles day that is a


holiday that they celebrate in china i'll call it a sudo holiday really where it's really retail driven and there are a lot of discounts and you can see that i mean alibaba is driving amazing results on that day in addition in 2020 new stores on aliexpress's cross-border platform increased by 132 percent showing room for future growth on the platform and the last point is that alibaba is developing ai and self-driving tech to compete with companies like tesla and why this is important in my opinion is


that it highlights the fact that alibaba is investing in future technologies they're not just resting on their laurels this to me clearly shows that alibaba is performing right now as well as preparing itself properly for the future and with china poised to roll out its digital you want to a wider audience i only expect e-commerce to grow in china which bodes really really well for alibaba so just to quickly summarize all of my points for you number one the stock lost a lot of price value due to market fear which


i see personally as a buying opportunity i think usually when fear spreads through the market a lot of it is irrational and it causes the prices to actually go down more than they should and this plays right into a strategy that is near and dear to my heart which is buy low and sell high a strategy i think that any fourth grader who's ever heard of the stock market is familiar with number two i expect the stock to jump at least 39 in the next 12 months i illustrated exactly why earlier so go


back you can see i benchmarked it versus performance of amazon and showed exactly why i think it is extremely undervalued and how the 39 increase in the stock price is possible number three 65 of all chinese e-commerce sales and 69 of the value of all e-commerce sales in 2020 in china were done on alibaba boy if that doesn't convince you that this is a company that's worth investing in i really don't know what will and finally they are investing in the future this is a company that has a


future they are investing in technologies and other companies that are going to keep delivering financial sales growth to their bottom line which will inevitably cause the price of the stock to go up that's it for this video and i thank you all for watching if you like the video don't forget to give me a like and subscribe if you've just found me and give me a comment or a question i always make sure i answer the comments and reply to the people who've taken the time to write to me so give it a shot


and if you have a request also throw it in the comments i will definitely see it and i will definitely reply to you as always i wish you happiness i wish you all success see you in the next one hasta luego