5 Undervalued Cyclical Stocks To Invest In According to Analysts

3. Alibaba Group Holding Limited (NYSE:BABA)

PE ratio as of April 18: 12.86

Average Analyst Price Target Upside: 51.59%

Number of Hedge Fund Holders: 116

Alibaba Group Holding Limited (NYSE:BABA) is a Chinese company engaged in e-commerce and retail, among others. On April 10, Citi analyst Alicia Yap lowered the price target on the stock to $124 from $126 and maintained a Buy rating on the shares. The stock has a consensus Buy rating among 15 analysts and its average price target of $104.49 represents an upside of nearly 52% from current levels.

As of April 18, the stock’s PE ratio is 12.86, which makes it one of the undervalued cyclical stocks to invest in according to analysts. According to our database, 116 hedge funds held stakes in Alibaba Group Holding Limited (NYSE:BABA) in the fourth quarter of 2023, with positions worth $3.587 billion. As of December 31, 2023, with 4.35 million shares of the company, valued at $337.168 million, Appaloosa Management LP is the top shareholder of the company.

Artisan Partners stated the following regarding Alibaba Group Holding Limited (NYSE:BABA) in its fourth quarter 2023 investor letter:

“Pretty much all of our holdings rose during the quarter. Only one stock declined by more than a couple of percent—Alibaba Group Holding Limited (NYSE:BABA), which was down 9% for the quarter and 12% for the year. This investment continues to be a disappointment. We estimate the shares are trading at around 5X EBITA—a valuation normally reserved for a company with evaporating profits. While it’s true Alibaba is underperforming its peers in the market, the fact is it remains the market leader in its core businesses, and the business is still growing. In the most recent quarter, revenues grew 9% and profits grew 26%.It’s not evaporating.

The management seems to be making meaningful changes designed to enhance shareholder value, including structural changes to improve profitability and restore its competitive position. It is monetizing non-core assets and making improvements in capital allocation. A lot of good things are happening that are not yet recognized in the share price. There are reasons—primarily geopolitical—for this, but at the current valuation, we could easily see the shares double and they would still be cheap.”