Is Alibaba (BABA) Stock Undervalued? This Top Analyst Says Yes
The China internet growth story has come on full force, and at the front of the trend is e-commerce giant Alibaba (NYSE:BABA). Anyone who thinks otherwise need look no further than than BABA stock, which has doubled last year and is likely to keep moving higher, at least if you ask Argus’ top analyst Jim Kelleher.
Kelleher initiated coverage on shares of Alibaba with a Buy rating and a $275 price target, which implies an upside of 45% from current levels.
Investors who listened to Kelleher over the past year have made nearly 24% on their Kelleher bets, according to TipRanks. The analyst holds 72% success rate and is ranked #90 out of 4,822 analysts.
Kelleher wrote, “Although BABA shares have had a strong multi-year run, we regard the stock as attractive based on mid-double-digit growth prospects for GMV. As the company continues to improve operational efficiency, margin expansion is expected to boost EPS at a faster pace than revenue. We believe that BABA’s growth prospects are accelerating more rapidly than the share price, creating a favorable entry point. The ADSs also appear attractively valued. Based on peer group, historical comparables analysis, and discounted free cash flow valuation, we believe the BABA ADSs are attractive up to $330 and beyond.”
“Compared with a peer group of eCommerce, cloud and internet companies, BABA trades at a discount to peers on forward P/E, relative P/E, price to sales and Enterprise Value to EBITDA. Peer-indicated value is in the high-$300s to $400 range. Using our two- and three-stage discounted free cash flow model, we calculate a value in the $315 range,” the analyst added.
This top analyst is not the only fan of Alibaba, as TipRanks analytics exhibit BABA as a Strong Buy. Based on 15 analysts polled in the last 3 months, all 15 rate a Buy on Alibaba stock. The 12-month average price target stands at $248, marking a 30% upside from where the stock is currently trading.