Alibaba Stock Price and Forecast: Two reasons why BABA is going to outperform

Alibaba (BABA) stock continues to get some good press following last week's verbal intervention by the Chinese authorities. After a tumultuous 18 months or so, the tide may finally be turning for BABA stock investors. Charlie Munger (Warren Buffet's right-hand man) is a noted BABA holder, and perhaps now the legendary value investor can finally begin to see a return on his investment. 

Alibaba Stock News: Increases buyback by a cool $10 billion

Alibaba stock is soaring on Tuesday, because the company announced late on Monday that it was increasing its buyback program by $10 billion. Alibaba will now buy back $25 billion of its stock this year to boost sentiment. Chinese tech stocks had already received a pretty decent shot in the arm from some verbal intervention via Chinese authorities last week. The Chinese regulators said they would support US listings and also that state insurance firms would increase their investments in Chinese equities.

This resulted in some spectacular gains for Chinese tech stocks. Probably the most notable was Didi (DIDI), which rallied 60% on the news. The widely followed Chinese tech ETF rallied 40% last Wednesday. Alibaba was not to miss out and popped 36%. It has held these gains for the most part, and the latest buyback news will only further consolidate the recent gain. It may be time to once again take a look at BABA stock's fundamental or value side. 

BABA trades on a modest price/earnings multiple of 12.5. Amazon (AMZN) by comparison trades on a P/E multiple of 50. Amazon's gross margin is 42%, while Alibaba's is comparable at 38%. Alibaba is strongly profitable and trades at just over two times revenue. It looks very cheap on a fundamental basis.

Alibaba Stock Forecast

Breaking above $110 is the first part of bottoming out. We see from the weekly chart below the significance of this move. 

Alibaba (BABA) stock weekly

That will then bring $129.77 into view. This is the series of lows from May 2019 that held strongly as support and then served as strong resistance in early 2022. All we need is some confirmation from the RSI and MACD. We expect the stock to finally bottom out and begin a cautious long-term recovery. The main uncertainty has been removed.