Time to jump in Alibaba (BABA:NYSE)?

Alibaba is currently trading at an all-time low, down 30% from its high in early November. Investors and traders are nervous because the Wall Street Journal published an article stating the following:

“The Journal reported that the company was being plagued by "brushers," or users who are paid by vendors to buy products at cost and then write positive reviews in an effort to move a vendor's listings higher up in search results.” – Yahoo Finance

I think that practice, if really used, is certainly not unique to Alibaba.

Alibaba actually trade at a P/E of 45, which is low if we compare to eBay (1,569) and Amazon (EPS negative). I also like a nice 38% profit margin which is way higher than competitors.

However, flood of shares will be coming via lockup expiration as pointed out by 247wallst.com:

“How big is the flood? On March 19, some 429 million ordinary shares will be available for sale in the public market, which is more than the 320 million shares the company sold in the IPO and about 17% of the shares outstanding. That is easily trumped by a massive 1.58 billion shares that will available for sale later this year, on September 21, which represents 64% of the shares outstanding.”

By analyzing BABA I found an interesting cycle with the S&P500 which suggests it’s a good time to buy Alibaba (in blue, Alibaba):

However, one should not forget that the stock market valuation is really high. A major down move could dramatically impact BABA. Major stock market indexes are positively correlated with Alibaba.

Will you jump in for a quick trade, hold it for the long run, or avoid it?