Chinese e-commerce and tech giant Alibaba (BABA) recently bought back company shares to cancel them. A series of transactions saw the company repurchase shares of BABA stock from investors. The filings cover actions as far back as December, including more than 24 million shares being canceled.
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Share repurchases and cancellations are often a positive catalyst for a company’s stock as they increase investor morale. It shows shareholders the company has the funds to safely repurchase its stock, returning cash to those who invested in it.
In this case, investors reacted well to the stock repurchase and cancelation news. Shares of BABA stock are up 0.76% as of this writing. This builds on a 24.74% increase over the last year and a 5.97% rise year-to-date.
What the Share Buyback Means for Alibaba
With this share buyback, investors will potentially see improved performance from Alibaba. Reducing float, which is the number of shares available on the public market, can increase a company’s earnings per share and other financial metrics.
Another change from share repurchases is changing stock prices. When shares are canceled, it can empower the remaining shares on the market. That makes sense as this is the opposite of a share offering, which dilutes investors’ stakes in a company. This news can increase share price without largely affecting a company’s market capitalization.
Is BABA Stock a Buy, Sell, or Hold?
Turning to Wall Street, the analysts’ consensus rating for Alibaba is Strong Buy based on 11 Buy and one Hold ratings over the last three months. With that comes an average price target of $121.33, a high of $144, and a low of $105. This represents a potential 35.88% upside for BABA shares.
