One of the most beaten-down large-cap stocks of the past two years, Alibaba (NYSE:BABA), only seems to be in the news for the wrong reasons. Indeed, after topping out at more than $300 per share during the last bull market cycle, BABA stock has recently traded below $67 per share after making a series of new lows over the past year.
Today, that trend appears to be reverting in a rather impressive fashion. News that Jack Ma and Joe Tsai, the company’s two co-founders, invested $200 million into the company they founded has sent shares rocketing higher. At the time of writing, this move is nearly 8%.
Let’s dive into why this is such a big deal and what investors may want to make of the news.
BABA Stock Surges as Ma and Tsai Buy the Stock Heavily
Alibaba is a company with a very storied past, even considering only the past two years. Jack Ma, the frontman for the company and one of the most well-respected Chinese billionaires known in the West, was effectively ousted by the Chinese government over critical remarks he made years ago. This was followed by significant regulatory scrutiny, with the company’s financial arm, Ant Financial, barred from making an initial public offering in the U.S.
Other regulatory crackdowns affected Alibaba and its tech peers. But it appears to be the case that regulators started looking at Alibaba closely following these comments. That said, market participants and fans of Jack Ma have looked for any sort of sign from the silenced billionaire for some time, with little to go off of.
This move has sent a strong signal to the markets that the folks behind the scenes believe a turnaround could be on the horizon. Indeed, trading at its current levels, Alibaba’s valuation has been decimated. Despite slowing growth tied to lower Chinese economic output, BABA stock now trades at only 10 times trailing earnings. For a company that was producing triple-digit revenue growth a few years ago, that’s an incredible discount.
We’ll have to see if this rally can continue. But for now, this is the massive catalyst Alibaba investors have been waiting for that’s worth paying attention to.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
