Alibaba Stock Gains Ground On News About U.S. – China Virtual Summit

Shares of Alibaba gained strong upside momentum amid optimism on U.S. – China relations.

Recent reports indicated that President Joe Biden and President Xi Jinping will have a virtual summit in 2021. This summit will be a great opportunity to ease tensions between the world’s two biggest economies, and Chinese stocks are reacting accordingly.

Alibaba stock has been declining throughout 2021 as Chinese authorities put pressure on various industries, from tutoring to online gaming, in order to solve current social problems. Fears about the potential default of China’s developer Evergrande and smaller developers have also hurt Chinese stocks, including Alibaba. Previous problems of Alibaba’s founder Jack Ma also served as a material bearish catalyst for the stock.

What’s Next For Alibaba Stock?

Currently, analysts expect that Alibaba will report earnings of $9.3 per share this year and $10.82 per share in the next year, so the stock is trading at roughly 14 forward P/E which is cheap for the current market environment.

However, earnings estimates have been trending down in recent months, which is not surprising given the recent developments in China. At this point, the key question is whether the stock has declined enough to become attractive for value-oriented investors.

It should be noted that Alibaba shares reached highs near the $320 level back at the end of October 2020, so the stock lost half of its value in just one year. Most likely, traders who are comfortable with the risks that are currently present in China will find that Alibaba shares are attractive at current levels. For others, it’s a more challenging question as earnings estimates may move further down in case the business climate in China continues to deteriorate.

For a look at all of today’s economic events, check out our economic calendar.

This article was originally posted on FX Empire


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