This e-Commerce Play Offers Excellent Reward for the Risk

E-commerce continues to grow as a trend, with more customers making more purchases online globally. While that trend may look played out, companies are still posting record numbers. Alibaba (BABA) just reported an 8.5 percent increase in sales for its Singles Day holiday.

  • Special: This Company’s Share Price has Increased 1650% Since 2016
  • The downside? Growth came in at a reported a 26 percent increase from 2019 to 2020 thanks to the pandemic. While that trend is slowing, it’s still a worthwhile one, especially given how shares have performed recently.

    Thanks to a regulatory crackdown on tech companies, as well as a slowdown in the country’s real estate market, Chinese stocks have taken a hit.

    Shares of Alibaba have shed 35 percent over the past year. however, Alibaba has grown revenue by over 33 percent, and shares trade at under 20 times earnings, a huge valuation relative to many US-based e-commerce plays. If China slows down on its crackdowns, share could be in for a huge rally at their current valuation.

    Action to take: Shares look like an attractive buy now, as they have started to move higher in recent weeks following a big drop in September. The stock does not currently pay a dividend, but its fast growth should make up for it.

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  • Traders may like the March $185 calls. Last going for about $10.00, the options could offer high double-digit returns in the next few months if shares continue to trend higher.

     

    Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.