Tatro says Alibaba stock is ‘trading at a 40%-50% discount’ after Q1 results

Alibaba Group Holding Ltd (NYSE: BABA) ended nearly 5.0% up on Thursday after reporting market-beating results for its first financial quarter.

Alibaba Q1 earnings snapshot

• Earned ¥34.3 billion ($4.6 billion) or ¥13.30 per ADS
• Had ¥22.7 billion of net income last year (¥8.51 per ADS)
• Adjusted EPS printed at ¥17.37 as per the press release
• Revenue climbed 14% year-over-year to ¥234.2 billion
• Consensus was ¥14.59 a share on ¥224.7 billion revenue

Earlier this year, Alibaba said it will split into six units to reap regulatory benefits and unlocking shareholder value (find out more). According to Quint Tatro – the Founder of Joule Financial:

We’ve been long Alibaba for a long time. We continue to like the name. I think a lot of people don’t understand the reorganization that’s going to transpire here. Sum of the parts is quite attractive.

Should you buy Alibaba stock here?

Alibaba attributed ¥25.1 billion in revenue to its cloud business (up 4.0%) that it plans on spinning off by earning 2024. On CNBC’s “Power Lunch”, Joule Financial’s Tatro said today:

In our estimation, it’s trading at about 40% to 50% discount based on what growth is in the future. Impeccable balance sheet and breakup allows them to avoid some regulatory pitfalls and execute better.

Even with the Communist Party related risks, he sees about a 30% upside in Alibaba stock.

The Chinese eCommerce giant repurchased $3.1 billion worth of ADRs in Q1. Its international revenue went up a whopping 60% in the recently concluded quarter.