Top 5 Trending Stocks Today

2. Alibaba Group Holding Limited (NYSE:BABA)

Number of Hedge Fund Holders: 106

Shares of Alibaba Group Holding Limited (NYSE:BABA) rose over eight percent in mid-day trading Thursday following rumors that Washington and Beijing are close to reaching a deal. According to recently surfaced reports, the agreement will allow U.S. accounting regulators to scrutinize audit records of Chinese stocks listed on the American stock exchanges.

If the rumors turned out to be true, it would likely alleviate investors’ fears related to the delisting of Chinese firms trading on the U.S exchanges. Besides Alibaba Group Holding Limited (NYSE:BABA), many other Chinese stocks, including Baidu, JD.com and NIO, also moved up on Thursday.

Separately, investment management firm Artisan Partners talked about Alibaba Group Holding Limited (NYSE:BABA) in its second-quarter 2022 investor letter, stating:

“Alibaba rose 4% during the quarter. We would love to say the share price performance was due to strong operational performance. Unfortunately, that was not the case. The most recent earnings results showed its core e-business still had not returned to growth, primarily due to the difficult retail environment caused by the government’s zero-COVID policy. Alibaba also appears to be losing market share due to its product mix tilted toward apparel and cosmetics, categories currently stalled in this environment. The share price performance this quarter was largely a function of exogenous items—specifically, government actions in the form of stimulus to support the economy and less regulations.

Despite the poor recent results, Alibaba remains a powerful economic engine. It is a global leader in e-commerce and cloud computing, both of which should grow nicely over time. Management has started taking actions to improve profitability, which has been burdened by significant investment in loss-making business ventures. The financial results should improve significantly when China’s economy starts to recover from COVID-19 outbreaks. The shares are incredibly cheap and have some of the highest upside potential in the portfolio. Even embedding significant losses from new ventures, we estimate they are trading at 11X-12X unlevered earnings. In our view, the shares could double, and they still would not be expensive.”