Let’s talk about the popular Altaba Inc (NASDAQ:AABA). The company’s shares received a lot of attention from a substantial price movement on the NasdaqGS in the over the last few months, increasing to $80.3 at one point, and dropping to the lows of $69.15. This high level of volatility gives investors the opportunity to enter into the stock, and potentially buy at an artificially low price. A question to answer is whether Altaba’s current trading price of $75.73 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Altaba’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change. View our latest analysis for Altaba
What’s the opportunity in Altaba?Great news for investors – Altaba is still trading at a fairly cheap price. I’ve used the price-to-equity ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 2.82x is currently well-below the industry average of 26.9x, meaning that it is trading at a cheaper price relative to its peers. Although, there may be another chance to buy again in the future. This is because Altaba’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.
What kind of growth will Altaba generate?Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. However, with an extremely negative double-digit change in profit expected next year, near-term growth is certainly not a driver of a buy decision. It seems like high uncertainty is on the cards for Altaba, at least in the near future.
What this means for you:
Are you a shareholder? Although AABA is currently undervalued, the negative outlook does bring on some uncertainty, which equates to higher risk. Consider whether you want to increase your portfolio exposure to AABA, or whether diversifying into another stock may be a better move for your total risk and return.
Are you a potential investor? If you’ve been keeping an eye on AABA for a while, but hesitant on making the leap, I recommend you research further into the stock. Given its current undervaluation, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Altaba. You can find everything you need to know about Altaba in the latest infographic research report. If you are no longer interested in Altaba, you can use our free platform to see my list of over 50 other stocks with a high growth potential.