There was a fair amount of consternation among investors going into Alibaba’s (BABA) Investor Day believing that the Chinese Internet giant may guide to lower than consensus bottom line growth, given increasing investments in Services, Ele.me in particular. However, CFO Maggie Wu stated that there was no update to the guidance provided on the March earnings call.
SunTrust’s top analyst Youssef Squali came away from the event incrementally more positive on 1) the life of BABA after Jack Ma; 2) the potential for increased monetization; and 3) value creation of BABA as a strategic acquirer.
As such, Squali remains bullish on the stock, reiterating a Buy rating with a price target of $205, which represents a potential upside of 31% from where the stock is currently trading.
Squali noted, “We believe the company’s fundamentals remain very strong, positioning it for sustained growth and success long-term; short-term however, macro concerns around China’s decelerating economy and trade war with the US, which is likely to get worse before getting better, are weighting on the stock. In both cases, we believe that the company’s focus first and foremost on the rising standards of living of the Chinese consumer (95% of revenues come from China, with little in way of exports to the US), and of the rising digitization trend sweeping the Chinese economy should help insulate the company in this environment, relatively speaking.”
With respect to Jack Ma succession plan, the analyst stated, “We believe the departure of Jack Ma has been slowly planned and executed, and is representative of a robust corporate culture and deep management bench, demonstrated by the numerous leaders that presented on their various business segments throughout this 2-day event, and fostered by the company’s common mission of making it easy to do business anywhere in this digital era.”
Youssef Squali has a very good TipRanks score with a 69% success rate and a high ranking of #64 out of 4,874 analysts. Squali realizes 22.8% in his yearly returns, while when recommending BABA, the analyst earns 16.3% in average profits on the stock.
Net net, the rest of Wall Street seems to echo Squali’s resounding confidence, considering TipRanks analytics indicate BABA as a Strong Buy. Out of 16 analysts polled in the last 3 months, all 16 are bullish on Alibaba stock. With a return potential of nearly 52%, the stock’s consensus target price stands at $236.94. (See BABA’s price targets and analyst ratings on TipRanks)