10 Nov

Alibaba, JD, and Baidu Gain Big this Month and Beyond

WRITTEN BY Aditya Raghunath

China’s tech giants Alibaba (BABA), Jd.com (JD), and Baidu (BIDU) started November 2019 on a strong note. While JD stock is up 6.7%, Alibaba and Baidu gained 5.9% and 22%, respectively, this month.

The three tech stocks gained momentum this month on rising optimism of a trade deal. According to this Bloomberg report, US National Security Advisor Robert O’Brien stated, “We’re relatively close to an agreement. I’m cautiously optimistic about it.”

We know that Chinese stocks were decimated since the start of 2018 due to the ongoing trade war and a slowing domestic economy. Though JD stock is trading at its 52-week high currently, the stock is still trading 34% below its record high. Also, Alibaba and Baidu are trading 10% and 55%, respectively, below record highs.

JD and Baidu third-quarter results to come

JD.com will report its third-quarter results on November 15, 2019. Analysts expect the firm to post sales of $18.13 billion and earnings of $0.17 in the September quarter. In case JD.com manages to beat consensus estimates, the stock will soar higher.

Baidu stock gained 14% on November 7 after it managed to beat Wall Street estimates. Also, Alibaba announced its earnings release earlier this month. The company beat consensus earnings estimates by 23.3%.

Is Alibaba stock undervalued?

While JD.com, Baidu, and Alibaba made a strong comeback this year, let’s look at their valuation metrics to see if they can move higher. Currently, analysts value Alibaba stock at $487.3 billion or 6.6x forward sales.

Alibaba stock is trading at a forward price to earnings multiple of 20.9x. Comparatively, analysts estimate its earnings will rise by 28.5% in 2019 and 25.1% in 2020. The stock gained over 100% since its IPO when its earnings growth was 29% annually.

Additionally, analysts expect Alibaba’s sales to rise by 33.7% to $73.23 billion in 2019 and 29.4% to $94.8 billion in 2020. They have an average 12-month price target of $222.54 on BABA stock. This indicates an upside potential of 19%.

JD stock may rise 157% by the end of 2019

Analysts value JD stock at $48.3 billion or 0.6x forward sales. The stock is trading at a forward price to earnings multiple of 27.2x. Comparatively, analysts estimate its earnings will rise by 157% in 2019 and 35.6% in 2020.

Analysts expect JD’s sales to rise by 15.8% to $77.4 billion in 2019 and 17.3% to $93.2 billion in 2020. They have an average 12-month price target of $35.87 on JD stock. This indicates an upside potential of 8% from the current price of $33.23.

Baidu stock may decline into 2020

Additionally, analysts value Baidu stock at $43.4 billion or 2.9x forward sales. The stock is trading at a forward price to earnings multiple of 18.8x. Comparatively, analysts estimate its earnings will fall by 50.5% in 2019 and then rise by 36% in 2020.

Analysts expect Baidu’s sales to fall 1.2% to $15.01 billion in 2019 and 12.1% to $16.83 billion in 2020. They have an average 12-month price target of $142.23 on Baidu stock. This indicates an upside potential of 14.4% from the current price.

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