The rout among growth stocks has been brutal over the past few months. Indeed, the Nasdaq index has dropped over 23% in the past year and 30% over the past year. I own several US growth stocks in my portfolio, meaning that this fall has been devastating for my portfolio. However, I invest for the long term, and I believe that this dip has led to many opportunities to buy. Alibaba (NYSE: BABA) is one stock that looks far too cheap at its current price.

The decline of Alibaba

In October 2020, Alibaba had a market capitalisation of $800bn, and many believed that it would be the next company to reach the $1trn valuation mark. However, from this point, everything started to go downhill. 

For one, China started to crack down on tech giants, handing out extremely large fines for anti-competitive behaviour. For example, in the quarter ending 31 March 2021, it was announced that Alibaba had been given a $2.8bn fine under the anti-monopoly act. This was the largest fine ever handed out by the Chinese government. It also represented around 4% of the company’s domestic annual sales. 

Recently, the group has also seen slowing growth, partly due to the macroeconomic environment. This includes large inflationary pressures, which may reduce consumer spending on discretionary goods. As such, alongside other growth stocks, Alibaba has dipped to a market cap of ‘only’ $300bn. Over the past year, it has fallen 50%. 

What are the positives? 

Despite these recent fears, I can still see a large amount of long-term potential with Alibaba. For example, despite the macroeconomic uncertainties, revenue climbed 9% year on year. Although this is far slower growth than previously, it is still encouraging to see some sort of growth. 

Further, China has recently signalled an easing of its tech crackdown, after Chinese officials met with some of the country’s top technology executives. Chinese Vice-Premier Liu He also signalled that these companies would receive more support from the government. Some investors have argued that this may indicate the start of a bull market for Chinese tech stocks.

Finally, I feel that the group’s international operations could drive future growth for the company. For example, in 2018, Alibaba acquired Daraz, which has expanded Alibaba’s reach into Pakistan, Bangladesh, Sri Lanka, and Nepal. The company also owns Lazada, which operates in south-east Asia, and Trendyol in Turkey. The CEO of Alibaba, Daniel Zhang, believes that these international businesses have “huge potential”. This is a very encouraging sign. 

What’s next for this growth stock?

There are many challenges facing Alibaba, yet I remain confident about the company’s long-term prospects. Revenue in the Asian e-commerce market is expected to reach over $2.6trn in 2025, up from around $2trn this year. Alibaba also trades at a price-to-earnings ratio of around 14. This is very low for a growth stock. Therefore, this is a company I would be very willing to buy and hold for the next five years. 

The post A bargain growth stock to buy and hold for 5 years appeared first on The Twelfth Magpie.

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Stuart Blair has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

A telehealth provider

Teladoc (NYSE: TDOC) has suffered a tragic decline since February this year, with the shares falling over 60%. Over the past year, it has also seen a decline of around 45%. This is despite the company continuing to grow revenues, even despite fears that telehealth will become less relevant after Covid. 

In fact, in the company’s Q3 trading update, it reported revenue growth of 81% year-on-year, hitting $522m. This means that the company expects full-year revenues of over $2bn, around twice as much as last year. The company also recently launched Primary360, which allows clients to pick their healthcare provider. I feel that this will help the company cement its position as a market leader in the telehealth sector. The consultancy firm McKinsey & Company also estimates that the US virtual care market could reach $250bn. With a market cap of just $17bn, and as a current leader in this market, Teladoc has plenty more room to grow.

But there are risks for the growth stock, which is the main reason why the shares have fallen. For example, the transition to virtual healthcare is certainly not guaranteed, and many customers may revert to face-to-face healthcare post-Covid. Further, the company is continually posting losses, and in Q3, the net loss totalled $84.3m. Although this was primarily due to stock-based compensation, which should cease at some point, it is still a slight worry that the company is unable to reach profitability despite the surge of demand caused by Covid. Even so, I think the company’s potential outweighs these risks, and I may add more shares to my portfolio.

A Chinese growth stock

Alibaba (NYSE: BABA) has struggled over the past year, falling 50%. This has mainly due to regulatory crackdowns from the Chinese government, which have threatened to depress profits for the e-commerce company. This worsened recently, as Alibaba was fined once again on Saturday for anti-competitive behaviour.

The most recent Q2 results were also disappointing, and this has seen the Alibaba share price fall to post-pandemic lows. In fact, although revenue managed to grow 29% year-on-year to over $31bn, this was below analysts’ estimations and far slower growth than last year. Net income also only managed to reach $524m, an 87% decrease from last year. Although this was mainly due to changes in the market price of the company’s equity investments, alongside increased investment from the company, it is still a worry.

But with Alibaba shares priced at just $136, I feel that it is oversold. Indeed, despite the headwinds it faces, it still expects FY2022 revenue growth of over 20%. This is far slower than last year, but still a positive sign that it is managing to grow. Slower growth is also factored into the share price. Indeed, it has a forward price-to-sales ratio of around three. This is very low for a growth stock, and despite the company’s slowing growth, still demonstrates undervaluation. Therefore, I may buy some Alibaba shares.

The post 2 oversold growth stocks to buy today appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Stuart Blair owns shares in Teladoc Health. The Motley Fool UK has recommended Teladoc Health. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.