I am sure that you’ll remember Alibaba Group Holding Ltd. (NYSE:BABA). I wrote about trading Alibaba some four months ago in a post in which I recommended playing BABA options with a bear straddle because the stock was yet to show a definite trading pattern.
I am back to discussing the options of Alibaba today. Alibaba with its market capitalization of $225.69B is a China-based online and mobile commerce company in retail and wholesale trade, as well as cloud computing and other services. The Company provides technology and services to enable consumers, merchants, and other participants to conduct commerce in its ecosystem.
A Quick Recap of Alibaba’s Performance
Alibaba’s IPO in September 2014 was a colossal success as the shares that were offered at a $68 IPO price jumped by 38% in the session to close at $92 per share. Alibaba currently holds the position of the world’s most valuable e-commerce company with its market cap of $227; which is about 15% more than the market capitalization of its closest competitor Amazon. In essence, Alibaba offers investors better value for money than Amazon, and options traders can expect to benefit from the positive sentiment. Below are some reasons to be positive on Alibaba and BABA for the long term:
Alibaba is huge in China and China is one of the fastest growing economies in the world. It has been reported that China had a 7.1% growth in its GDP. It needs no mentioning that the 7.1% GDP growth outperforms the 0% to 2% GDP growth that was reported in the U.S. and Europe.
China itself offers Alibaba a gargantuan market with its population of 1.3B Chinese. It might interest you to know that China is four times as big as the United States. Hence, the potential that Alibaba has for huge volume sales China alone cannot be overemphasized.
The rate at which the use of the internet is penetrating China also provides additional reasons to be optimistic about the prospects of Alibaba. It is expected that the use of mobile phone among the Chinese will increase to 87% of the population in 2016 up from 77% of the population in 2014.
Let’s Talk Financials
Alibaba is set to release its Q1 2016 results on August 12, and we can expect the stock to move in a significant direction towards the north when the earnings are released. The company has shown the capability to deliver decent earnings in the fourth quarter 2015 earnings that it posted on May 7. The company reported a 45% increase in revenue on earnings of $2.25 per share. The company expects its revenue to increase by 35% and it expects its earnings to increase by 25%.
How to Trade BABA Options
It is high time we took another shot at BABA options, and I think you should buy BABA calls. I recommend buying the BABA Jan 2016 90.000 call (BABA160115C00090000) at an asking price of $8.90.
— Daily Option Alerts