Bloomberg

The recent decline in Alibaba (BABA - Get Report) shares represents a good buying opportunity, wrote Stifel analyst Scott Devitt on Friday, adding the Chinese e-commerce giant to the company's Select List of top investments. 

The stock has fallen 20% to $156 a share since the close on May 3, the last trading day before President Trump imposed higher tariffs on Chinese goods just as the market was pricing in optimism a trade deal would be agreed on. 

Devitt noted the stock is down 12% since May 15 when Alibaba reported a stellar earnings report in which it beat earnings per share estimates by 33% on the back of explosive revenue growth in cloud computing and strong performance in its core e-commerce business. 

"While it is impossible to predict the timing of resolution of certain macro events, we believe the recent pullback has created an opportunity to own shares with a long-term investment horizon," Devitt said. 

Shares of Alibaba closed down .64% on Friday to $155.00.

Devitt mentioned that Alibaba now trades at a 2021 expected EBITDA multiple of 13, "and is even cheaper on earnings from the company's core marketplace-based businesses (primarily Tmall and Taobao; 55% of F2019 revenue)." The current EBITDA multiple "compares to other large / megacap U.S. or global eCommerce and digital advertising peers trading at an average of 12x on forward- two year EBITDA." Amazon (AMZN - Get Report) , for example, trades at a 2021 EBITDA multiple of 13.5. Meanwhile, "Alibaba expects to maintain an organic growth rate in the mid-30% range in F2020, significantly above the peer group," Devitt said. 

Devitt also pointed out that Alibaba does very little business with the U.S., and that the long-term trends in the Chinese economy are a tailwind for Alibaba. While many are concerned China's economic growth is decelerating, "long-term secular trends such as the growing middle class and the economy shifting more towards services are more important to Alibaba's long-term growth trajectory," said Devitt. 

Alibaba shares are up around 14.7% year-to-date. 

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