Stocks famously climb a “wall of worry.” One thing that worries some investors now is the market’s valuation. By some metrics, the stock market is near values last seen near big peaks, like in 2000 and 2008.
That’s not a healthy sign, by any means. However, if companies can grow their earnings, revenues, and income, the extreme valuation issue can be fixed in time. Some companies are also clearly still a strong value today.
One such value today is Alibaba Group Holding (BABA). The Chinese e-commerce and cloud computing giant trades for about 10 times earnings.
That’s cheap compared to most financial markets, and much cheaper than most tech stocks. For comparison, Amazon (AMZN), trades for about 45 times earnings.
Plus, Alibaba has about 25% of its market cap in cash on the balance sheet, which makes shares look even cheaper in comparison.
While China has been struggling recently, the rise of its middle class and increased spending on computing power bodes well for both sides of Alibaba’s business.
Action to take: Speculative investors may like Alibaba shares here. The company is statistically cheap and can remain so, but a move towards its peers could make it a big tech winner in 2025.
Plus, at current prices, Alibaba pays a 2.2% dividend.
For traders, the March 2025 $105 calls, last trading for about $1.75, could see mid-to-high double-digit returns on a rally in shares.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any company mentioned in this article.