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Alibaba feels like a shitty girlfriend that my family doesn’t love but I just know she has potential.

So why am I not giving up on Alibaba just yet?

Their latest earnings report was a mixed bag but there’s a lot to love. Let me explain.

They beat expectations on the earnings side, reporting $2.29 per share. $0.20 more than the experts predicted.

But the revenue wasn’t as pretty. It came up short by around $686 million.

How does that happen? How can you beat earnings by so much with $686 million in revenue missing?

Turns out, Alibaba’s bread-and-butter, the Taobao and Tmall Group, had a rough quarter. For context, the Taobao & Tmall are like ebay & Amazon equivalents for China. Taobao is consumer-to-consumer (ebay), Tmall is business-to-consumer (Amazon).

Anyway, even with solid promotions running, revenue in this segment dipped. Direct sales took the biggest hit with a 9% drop. China’s economy isn’t bouncing back as quickly as we’d like which is dragging down top line growth.

Key point there is “as quickly as we’d like”. It’ll come, just might take a little longer than we hoped for.

In the meantime, it gives me a little longer to average in on Chinese stocks I love at great prices.

And Alibaba’s earnings weren’t all doom & gloom.

Cloud business and international e-commerce operations were * chef’s kiss *

Cloud revenue grew by 6%, driven by the rising demand for AI products. International Digital Commerce Group (think Aliexpress) crushed it with 32% year-over-year growth.

You want more good news?

How does $2.4 billion in free cash flow this quarter sound? And they didn’t just park it under a mattress. They’re buying back shares like there’s no tomorrow. Alibaba has already bought back $15.2 billion worth of shares in the last year alone & they’re not slowing down.

That might be because the board see what I see.

Alibaba’s low valuation is hard to ignore.

With a price-to-earnings ratio of just 9X, it's looking pretty cheap compared to its peers. The biggest risk is if their e-commerce segment continues to struggle but at the current price the potential downside is worth the potentially huge upside.

If the Chinese economy gets some momentum back, Alibaba’s biggest revenue driver is perfectly positioned to capture all that consumer spending.

I’m targeting $120 which we’ve seen as a resistance multiple times in past & will re-evaluate whether to hold once we’re there. That’ll give me around 45% upside from the current price.

Stock buybacks, steady free cash flow & a market leader in one of the largest world economies, I think this is a solid bet if you’re willing to ride out the e-commerce volatility.

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Carnival Corps been taking a bit of a dip.

But before we start panicking & jumping ship, could this be the time to get aboard?

So what’s actually going on?

Well, there’s a bit of pessimism in the air around the travel industry as a whole right because of the potential slowdown in consumer spending.

On the back of that, CCL fell nearly 30% from highs in July. We fell right back to a support we’ve seen appear a few times at around $14 & since made back around 5%.

Even with the pessimism, Carnival have still been flying high by all accounts.

Q2, they crushed Wall Street’s expectations, with record bookings and customer deposits. Europe bookings were a shining star with yields jumping over 20%! Numbers like these & a perfect technical support bounce make it looks like a no-brainer.

But we do have to look at the whole picture & address the elephant in the room….debt.

Now, they have been working on improving this by 2026 but they are pretty highly leveraged. Higher than pre-covid levels. So if consumer spending does slow down in the travel sector, they might be more vulnerable than others.

Plus, they haven’t reinstated their dividend yet, unlike Royal Caribbean (RCL). Missing out on all the demand from those dividend kings out there.

If we want to keep the comparison going; Carnival’s stock is trading at a forward adjusted EBITDA multiple of 7.9x, significantly lower than RCL’s 10.3x.

In a sentence - Carnival looks undervalued compared to its peers.

And here’s the thing. Debt levels as they are don’t look great but they’re working on it. As investors, we make the most upside when we take calculated risks that others can’t see or won’t take. If everyone saw everything the same, there’d never be any money to make because everything would always be perfectly priced!

With strong bookings, solid growth, and a plan to tackle their debt, I think the value is there.

I’m targeting $20 which is a resistance that’s held up for the past year & gives me a 25% upside from the current price.

Qualcomm just dropped a solid earnings report.

Revenue growth, earnings growth, beating analysts expectations. So why is the stock price down? By nearly 25% since June?!

It boils down to two things – tensions with China & Apple’s move towards in-house chip development.

Those two things have spooked the market. Qualcomm’s stock has suffered because of it. But do we really need to be scared & become part of the panic-selling crowd?

I don’t think so.

Yes, Qualcomm is caught in the crossfire of the U.S.-China tech tussle, especially after the U.S. decided to revoke export licenses to Huawei.

But here’s the thing: this isn’t Qualcomm’s first rodeo with export restrictions. They’ve navigated these things before in the Trump regime & came out just fine. Latest earnings report showed a 50% revenue jump from Chinese smartphone makers so I think they can do it again.

In my opinion, the market’s overreacting to these geopolitical risks.

Qualcomm’s has diversified revenue streams & their position in the smartphone market – particularly with AI-enabled devices – is still rock solid. With AI tech set to be the next big thing in phones (just like every other sector) , Qualcomm’s well positioned to benefit.

Now, let’s talk about Apple.

Qualcomm’s been a key supplier of modem chips to Apple for years. The worry is Apple’s push to develop it’s own chips could hurt Qualcomm. And rightfully so. Apple accounts for about 20% of Qualcomm’s revenue. That’s pretty significant.

Here’s why I’m not too worried.

Qualcomm’s Snapdragon chips are leading the way for on-device AI & that’s where the future is headed. Snapdragon chips are recognised as one of the best for enabling AI capabilities, high quality graphics & 5G capabilities. Even if Apple cuts ties, Qualcomm’s strong relationships with other huge players like Samsung & Xiaomi should give them a buffer.

Plus, Qualcomm’s got a history of being ahead of the curve. They’re already making moves in the automotive & IoT sectors, which have huge growth potential. While the Apple risk is something I’ll be keeping an eye on, it’s not the end of the world for Qualcomm.

Especially not with the valuation gap this recent drop has given us. The current PE ratio after this drop has them valued below average for the sector. I think that’s pricing in way more risk than they’re exposed to.

If Qualcomm’s PE ratio valuation comes back to average for the sector, that’d give me a 36% upside. For a company that’s just had a solid earnings report all around, I think that upside is too good to pass up on.

Qualcomm’s been unfairly punished by the market.

Yes, there are risks – but they’re risks that Qualcomm has faced before and overcome. With strong fundamentals, a leadership position in AI, and a valuation that’s screaming “buy me,” they can take my money.

That’s all! See you same time next week 👋

P.S Hit reply & let me know what you thought of this weeks newsletter. All feedback is welcomed ❤️