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Alibaba Group Holding Ltd (BABA) Is Moving in the Right Direction: Top Analyst

Baird's Colin Sebastian likes what he sees so far in Chinese retail sales in 2018- and the gains this could spell out for BABA shares.


Looking at China online retail data, one of Wall Street’s best performing analysts is out cheering for Alibaba Group Holding Ltd (NYSE:BABA)- and what looks to be a robust beginning to the year.

Top analyst Colin Sebastian at Baird spotlights “a healthy start to the year for Chinese retail sales, creating upside potential for BABA top-line growth.”

Therefore, the analyst reiterates an Outperform rating on BABA stock with a $220 price target, which implies a close to 15% upside from current levels.

By China’s National Bureau of Statistics’ estimation, online retail sales reached 1.23T RMB in this year’s opening 2 months, indicating a 37.3% year-over-year rise. Meanwhile, consider the ramp up from this time last year’s 31.9% growth as well as the 32.2% growth seen in 2017. Meanwhile, online sales growth likewise experienced a bit of an upturn from fourth quarter momentum of 35.8% year-over-year growth- even on back of a stellar holiday shopping period.

Sebastian also underscores robust e-commerce expansion, where total retail sales flew 9.7% year-over-year, a jump from the 9.5% year-over-year growth seen this time last year- and noted solid performances cropping up particularly in rural areas that delivered 10.7% year-over-year in gains. The analyst explains, “As BABA continues to build out its New Retail strategy by investing in both online and offline retail, we note consumer trends continue to support the company’s retail thesis.”

Overall, “Significant growth opportunities remain beyond core China retail,” notes Sebastian, surmising: “In addition to its New Retail strategy, the company is investing heavily in a number of other nonretail initiatives, including its rapidly expanding cloud offerings (we estimate +98% Y/ Y growth in F4Q). Alibaba recently announced the development of the world’s second-fastest publicly available quantum computing service, providing a cloud-based solution to allow its customers to test algorithms and evaluate the performance of their own hardware. Despite its leading market share in the Chinese cloud computing market, BABA continues to prioritize share gains as it seeks to provide a broader array of cloud services to an expanding customer base.”

Colin Sebastian has a very good TipRanks score with a 79% success rate and a high ranking of #14 out of 4,787 analysts. Sebastian realizes 27.3% in his yearly returns. When recommending BABA, Sebastian earns 47.8% in average profits on the stock.

Alibaba reigns as one of analysts’ favorite stocks on the Street, according to TipRanks. With unanimous approval, all 16 analysts polled in the last 3 months rate a Buy on BABA stock. With a return potential of nearly 20%, the stock’s consensus target price stands at $230.31.