After a red-hot 2017 in which Alibaba (NYSE:BABA) stock price essentially doubled, the Chinese e-commerce giant hasn’t repeated on that success in 2018. Year-to-date, the stock has simply bounced between $170 and $200 and made very little material progress higher. This could however change, and sooner rather than later.
Alibaba stock is rising nearly 4% in Thursday’s trading session thanks to a robust beat-and-raise fiscal first-quarter earnings report that took away the firepower from the bears and gave it to the bulls.
Specifically, Alibaba reported fiscal first-quarter adjusted earnings per share of $1.22 on revenue of $12.22 billion, topping consensus expectations of $1.21 and $11.76 billion, respectively. For the second consecutive quarter, revenue was up 61 percent compared to a year ago.
SunTrust Robinson analyst Youssef Squali commented, “What we liked most about the quarter was that management continues to execute very well across virtually all of its operating segments, defying the gravitational law of large numbers, with the drivers of growth seemingly sustainable going forward. While doing this, management remains head-down focused on expanding its TAM and aggressively investing in longer-term growth opportunities.”
“While the stock was recently pressured by concerns around a trade war with the US, and a softening Chinese economy, we believe both are manageable for the company. On the trade war issue, BABA remains first and foremost a play on the rise of domestic Chinese consumption, with relatively small reliance on US consumers. In terms of US-based imports, the company (and the country at large) has been expanding its sources of imports (particularly in Europe, Australia and Asia) to offset possible disruption from the US. Lastly, in terms of the slowing Chinese economy, 80% of the new active consumers came from lower tier cities, reflecting strong demand from rising income and rising middle class, which we believe can be sustainable for sometime,” the analyst added.
Net net, Squali reiterates a Buy rating on Alibaba shares, with a price target of $215, which implies an upside of 16% from current levels.
According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Youssef Squali has a yearly average return of 22.1% and a 70.4% success rate. Squali has a 21.0% average return when recommending BABA, and is ranked #66 out of 4862 analysts.
Squali is certainly not the first analyst with an optimistic outlook for Alibaba share price. A total of 11 analysts suggest to buy the stock. The 12-month consensus mean price target for the stock is $250.55, reflecting a 36% upside over yesterday’s closing price.