We recently compiled a list of the Jim Cramer Recommends These 10 Stocks. In this article, we are going to take a look at where Alibaba Group Holding Limited (NYSE:BABA) stands against the other stocks recommended by Jim Cramer.
In a recent episode of Squawk on the Street, Jim Cramer discussed how global markets have become more interconnected than ever. He compared this to 1987, when Japan’s influence on U.S. stocks was clear, with Japanese investors driving up prices in sectors like waste management and railroads. This connection between markets was strong then, and it’s even stronger now.
“Obviously, we went down on Japan, and we went up on Japan. This is somewhat reminiscent of 1987, when, if Japan was up, they’d come over and flood our markets. Sometimes they didn’t care; they’d just start buying stocks, often starting with waste management and Browning-Ferris. “
Cramer explained that the weakening dollar further enhances this global link, benefiting companies that sell internationally, such as Coca-Cola. He also observed a significant shift in investor behavior—where people once looked for reasons to stay out of the market, they now seem more inclined to stay in, finding optimism even in bad news. This change in attitude mirrors today’s market environment, where good news lifts stocks, and even bad news is met with hope for a recovery.
“Back in the day, you’d wonder why Browning-Ferris was up, and the answer would be, ‘Large buyer, large buyer, large buyer.’ Eventually, you’d go out for a beer, and it turns out it’s Tokyo. They loved the rails. There was such craziness back then, but now, we’re even more linked. And with the dollar continuing to weaken, it’s good that we’re linked for companies like that.”
Jim Cramer noted the irony of discussing September as a traditionally bad month for the market. He pointed out that when people focus too much on a specific month being negative, it often doesn’t turn out that way. Cramer also mentioned that despite this expectation, the market had been up significantly, making last week’s market behavior seem unusual.
“Well, it’s funny. You talked about September being a bad month last week, so maybe we get there in a roundabout way. I know that when you single out a month, that’s often when it doesn’t happen. But I also know that we’re up big, and last week seemed odd.”
Our Methodology
For this article, we reviewed a recent episode of Jim Cramer’s Squawk on the Street and his post on the key things to watch in the stock market for Monday. We selected ten stocks that he mentioned and included information on hedge fund sentiment for each. The stocks are ranked by the number of hedge funds that own them, from lowest to highest.
At Insider Monkey we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
An e-commerce platform displaying a wide range of products to customers online.
Alibaba Group Holding Limited (NYSE:BABA)
Number of Hedge Fund Investors: 91
Jim Cramer reports that Susquehanna has reduced its price target for Alibaba Group Holding Limited (NYSE:BABA) but still holds a positive outlook on the stock. Even with a sluggish Chinese economy, analysts highlighted Alibaba Group Holding Limited (NYSE:BABA)’s advancements in artificial intelligence and pointed out that the company’s latest earnings report showed profits exceeding expectations.
“Susquehanna lowered its price target on Alibaba to $130 a share from $135, but maintained its positive rating on the Chinese e-commerce and cloud giant’s stock. Despite a sluggish Chinese economy, analysts touted Alibaba’s progress on AI initiatives and noted its most recent earnings report showed better-than-expect profits.”
Alibaba Group Holding Limited (NYSE:BABA) is set for substantial growth in the future, thanks to its strong position in China’s e-commerce sector with platforms like Taobao and Tmall, which are expanding rapidly. Alibaba Group Holding Limited (NYSE:BABA)’s cloud computing division, Alibaba Cloud, is a major player in Asia and is quickly increasing its global market share due to rising demand for cloud services. Alibaba Group Holding Limited (NYSE:BABA)’s significant investments in technology and innovation—such as artificial intelligence, big data, and logistics—enhance its competitive advantage.
Alibaba Group Holding Limited (NYSE:BABA)’s efforts to enter new markets and diversify into areas like digital media, entertainment, and international e-commerce provide additional revenue opportunities and growth potential. With a large consumer base in China and a growing international presence, Alibaba Group Holding Limited (NYSE:BABA)’s broad range of services and platforms sets the stage for ongoing growth.
O’keefe Stevens Advisory stated the following regarding Alibaba Group Holding Limited (NYSE:BABA) in its Q2 2024 investor letter:
“We initiated two new positions during the quarter: Alibaba Group Holding Limited (NYSE:BABA) and Perrigo (PRGO). Both have seen their stocks decline over 70%+ from their all-time highs.
Alibaba is the largest e-commerce player in China, with 40% gross merchandise volume (GMV) market share through its Taobao and T-mall businesses. While the cloud computing business is relatively small, its 37% market share in China positions it well to capitalize on the increasing demand for AI-related products. In the most recent quarter, AI-related cloud revenue recorded triple-digit growth y/y, with the expectation that total cloud revenue will accelerate to double-digit growth in 2H 2025.
It’s rare to find a dominant market share business with significant tailwinds trading for ~10x adj. EPS. After accounting for their ~$60B net cash balance sheet, the stock is trading at 6-7x, which, we believe, is far too cheap. We understand this business would not trade at this price if it were a U.S. business. However, the valuation gap at a high single-digit P/E is pricing in a combination of the following risks – 1. China invading Taiwan. 2. Cash can never leave mainland China (disproven). 3. Increasing competition from Pinduoduo and Shien resulting in market share loss 4. China’s geopolitical tensions worsen. 5. Economic slowdown stemming from the recent housing market downturn. 6. VIE structure creates doubt over the actual ownership of the business. All risks have merit, with cash distribution restrictions at the lower end due to the recently announced dividend and special dividend. Cash returned to shareholders totaled $16.5B in FY24, up from $13.4B in FY23…” (Click here to read the full text)
Overall BABA ranks 3rd on our list of the best stocks to buy according to Jim Cramer. While we acknowledge the potential of BABA as an investment, our conviction lies in the belief that under the radar AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than BABA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.