Alibaba Group Holding Ltd BABA 0.16% shares are up more than 11 percent on Thursday, trading at new all-time highs after the company issued fiscal 2018 guidance calling for revenue growth between 45 and 49 percent. The new guidance came in well above consensus Wall Street expectations of 37 percent growth on the year.
But while Alibaba shareholders celebrate the surprisingly good news, others remain skeptical of Alibaba’s numbers.
“You just don’t see that,” TD Ameritrade chief strategist JJ Kinahan told Benzinga, referring to Alibaba’s 45 percent revenue growth.
“It’s one of the things I think that people have to be careful of when they invest in international stocks. When the whole world’s having trouble putting their finger on why something like this happens, it’s why you really have to understand the business.”
In fact, Alibaba investors may have even more reason to question the company’s numbers. The U.S. Securities and Exchange Commission has been investigating Alibaba’s accounting practices for over a year now. Last May, Alibaba disclosed that the SEC was looking into transactions between Alibaba’s Cainiao arm and other Alibaba affiliates, as well as its methodology for reporting sales from its “Singles’ Day” event.
The investigation should serve as warning for Alibaba investors to look at the new revenue numbers with a critical eye.
“I think this is a great lesson for investors,” Kinahan said. “Do you really understand how Alibaba makes money? Unfortunately it happens a lot. It’s a lesson for domestic companies and certainly for international ones. If you don’t know all the factors, you’ve got to be very careful.”
“This is a fortunate accident I think for many people,” Kinahan said.
At the same time, market skepticism could serve as a bullish catalyst for Alibaba as well, according to Amplify Investments CEO Christian Magoon.
“Once the stock gets past this [investigation], be it a good or bad outcome, I think we will see a relief for Alibaba,” Magoon said back in November.
Despite the ongoing investigation, Alibaba shares have been…
Click here to continue reading
Want to learn more about how to profit off the stock market? Or maybe you just want to be able to look sophisticated in front of your coworkers when they ask you what you are reading on your Kindle, and you’d prefer to tell them “Oh, I’m just reading a book about stock market analysis,” rather than the usual “Oh, I’m just looking at pics of my ex-girlfriend on Facebook.” For these reasons and more, check out my book, Beating Wall Street with Common Sense. I don’t have a degree in finance; I have a degree in neuroscience. You don’t have to predict what stocks will do if you can predict what traders will do and be one step ahead of them. I made a 400% return in the stock market over five years using only basic principles of psychology and common sense. Beating Wall Street with Common Sense is now available on Amazon, and tradingcommonsense.com is always available on your local internet!
