After a blistering year in 2017, Alibaba (BABA) stock rose even higher this year before its shares collapsed. But with the shares returning to where they were last summer, is now the time to buy the stock? The answer is yes — at least if you ask Merrill Lynch’s Eddie Leung who reiterates a Buy rating on BABA, with a price target of $221, which implies a potential upside of 35% from current levels. (To watch Leung’s track record, click here)
Leung, in attendance at Alibaba’s Cloud Computing Conference held in Shanghai earlier this month, was blown away by Alibaba’s cloud platform AliCloud as it has “emerged as clear leader with increasingly sophisticated solutions.”
Indeed, Alicloud, which posted a 93% year-over-year jump in revenue, has become a force to be reckoned with. In the most-recent quarter, Alibaba posted a 61% jump in quarterly revenue, driven by the company’s cloud momentum, which surged to RMB 4.67 billion ($710 million).
Leung stated, “At Alibaba’s Computing Conference, AliCloud demonstrated its leadership position with: 1) more show cases with tech companies, large corporations and government entities; 2) a larger set of value-added services partners which offer comprehensive services from software, implementation, system design, consultancy and training; 3) solutions for a wider range of industries, from the earlier adopters like tech, government, finance and media to more recently manufacturing, retail, real estate and agriculture. AliCloud’s market share surpassed 45% and its penetration among Internet companies and large corporations has increased to 40-50%. We also see its marketing focus increasingly changing from individual features and capabilities in the past several events to integrated solutions to solve real business problems.”
“Various industry speakers indicate large corporations and government entities are able to see real business value from AliCloud, given jointly developed/ partners-supported software as a service (SaaS) that cater to their businesses. However, given the project-based approach that requires quite some consulting services and deeper involvement by AliCloud, these cases likely incur higher costs as well,” the analyst continued.
Net net, Wall Street backs Leung’s bullish bite into the Chinese e-commerce giant, as TipRanks analytics exhibit BABA as a Strong Buy. Out of 18 analysts polled in the last 3 months, all 18 are bullish on Alibaba stock. With a return potential of nearly 42%, the stock’s consensus target price stands at $233.94. (See BABA’s price targets and analyst ratings on TipRanks)