Report: Billionaire Jack Ma is buying the ‘cheap’ Alibaba stock

Alibaba (NYSE: BABA) stock price jumped by over 6% in the pre-market session after it emerged that Jack Ma, the company’s founder was aggressively buying the shares. The shares jumped to a high of $73 from the year-to-date low of $66.80.

In a report, the New York Times said that Ma and Joe Tsai, the company’s CEO have bought millions of shares in the past few months. Tsai bought $151 million Alibaba shares in the third quarter. Jack Ma, who is still a big shareholder, bought shares worth over $50 million in Hong Kong.

Insider transactions are often good barometers of a company’s health since they have more information about the company than outside investors. In addition to these insiders, Alibaba is also spending billions of dollars repurchasing its stock. 

Share buybacks are usually good because they are a sign that the company believes that the stock is undervalued. They also help to reduce the company’s share count, which boosts its earnings per share. The number of Alibaba’s outstanding shares has dropped to 2.53 billion from over 2.71 billion in 2021.

Alibaba stock price also jumped after reports that Beijing was considering announcing new measures to support the stock market. Some of these measures will see the government mobilize resources to take a stake in Chinese companies. This is happening as key Chinese indices like the Hang Seng and Shanghai Composite tumble.

Many analysts believe that Alibaba is one of the most undervalued companies in Wall Street, as I wrote here. The company, which has a major market share in e-commerce and cloud computing, has a forward PE ratio of 7.60, lower than its sector median of 15.60 and the 5-year average of 19. Similarly, the company has a forward EV to EBITDA of just 4.93 against a sector median of 9.88. Amazon, which does not carry the baggage that Alibaba carries, has a forward PE of 57.76 and a forward EV to EBITDA of 16.11.

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