Shares in Chinese e-commerce giant Alibaba have plummeted more than 65% from their all-time high at the end of 2020, amid economic uncertainty and tightening regulations. But the company’s revenues and profits have soared since then, and one successful fund manager sees the current valuation as a buying opportunity. “Around 2021, people were paying 30 times Alibaba’s profits forward,” said Sean Pesce, portfolio manager at Ranmore Fund Management. “Earnings have increased since then, but now everyone wants to pay only 7.5 times his earnings?” Alibaba shares are traded in the United States, Hong Kong and Germany. BABA 1Y Line The company’s stock price decline came amid concerns about a slowdown in China’s economy and Beijing authorities tightening regulations on the internet sector. Alibaba is not the only company affected. The MSCI China Index has fallen by nearly 50% in the past three years. “yes, [the economy is] Weak, problematic. The government is not great. we know about it. “If you look at the valuation, it’s already priced in. Alibaba is our third-largest stock,” said Andrew Lapping, Lanmore’s chief investment officer. [position] now. why? Alibaba’s earnings per share (EPS) have steadily increased from $2.25 in 2015 to $7.76 in the year ending March 2023. Analysts expect the company to report EPS of $8.8 in May for the current fiscal year. Wall Street analysts also expect Alibaba’s stock price to rise an average of 38.4% over the next 12 months, according to FactSet data, but Lapping also said the impact of Alibaba’s share buyback program is likely to be much lower. The company pointed out that the company’s value is significantly higher than that of US high-tech companies. As employees exercise stock-based compensation plans, their company’s stock gets diluted, but to prevent dilution from inflating their stock count, companies spend billions of dollars a year on stock buybacks. “In reality, much of the cash flow is not being returned to shareholders. This is to offset the dilution of stock options,” Rupp said. In Alibaba’s case, amid China’s tech boom, the company gave its employees lavish stock incentives, resulting in a 21.7 billion-share total in 2021. But the stock is now down 65%. Lapping added: “As stock prices have fallen, the actual cost of share buybacks to offset dilution is much less than the expense recorded in the income statement.” Alibaba stock delivered a total return of 30% in 2023, outperforming the S&P 500 and MSCI World Index, even without investing in the so-called “Magnificent 7” stocks.