Wall Street was shocked by the announcement that Alibaba’s (BABA) founder and chairman Jack Ma will be stepping down next year to pursue philanthropic activities. CEO Daniel Zhang will succeed Ma as chairman of the board, while Ma will continue as executive chairman until then to ensure a smooth transition. Ma’s departure comes at an unusually rocky time for Alibaba and the Chinese economy, which has been plagued by tariffs, trade war rhetoric, slowing economic growth and a strong U.S. dollar.
However, SunTrust’s top analyst Youssef Squali remains bullish on Alibaba shares, reiterating a Buy rating with a $205 price target, which implies an upside of 27% from current levels. (To see Squali’s picks, click here)
Squali commented, “While we’re a bit taken aback by the timing of the announcement, we believe that this decision has been long coming, that it was well thought out, and shows growing maturity in corporate governance. While Jack Ma will forever be the face of Alibaba, this move is designed, in our view to 1) show that Alibaba extends well beyond any one individual and that organizational excellence dictates leadership roles, 2) recognize that top talent can and does get the top job (even if Mr. Zhang is not a founding partner); and 3) ensure that Alibaba outlives any one leader as it strives to last 102 years (it’s merely 19 years old!).”
“We expect a smooth chairmanship transition during this period, with the company continuing to perform at the highest operating levels, but we also recognize that the business is getting more complex, and that the environments, both macro and micro, are getting more challenging,” the analyst added.
According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Youssef Squali has a yearly average return of 23.1% and a 68.9% success rate. Squali has a 16.8% average return when recommending BABA, and is ranked #66 out of 4870 analysts.
Voices on the Street predominantly show the Chinese online retail giant to be one of the strongest stock picks. TipRanks analytics exhibit BABA as a Strong Buy, with 16 back-to-back buy ratings in the last three months. Meanwhile the average analyst price target of $236.94 suggests the stock still has upside potential of just over 47% from the current share price for the next 12 months. (See BABA’s price targets and analyst ratings on TipRanks)