Alibaba: Between Recent Deals and Upcoming Investor Day, Top Analyst Sees 20% Upside for the Stock

Last week, Alibaba (BABA) acquired online shopping platform Kaola from Chinese gaming and entertainment company NetEase for $2 billion. Though Alibaba dominates e-commerce in China, the acquisition of a luxury and overseas-focused platform should help solidify its place as the go-to platform for all goods for Chinese consumers. Beyond that, the company also invested $700 million for a stake in NetEase’s Cloud Music platform, which helps Alibaba better compete against Tescent, parent company of Tescent Music, China’s dominant streaming service.

With the two recent moves, Alibaba is continuing to emulate American tech giants in how it is positioning itself. Similar to Amazon, the company was founded as an e-commerce platform, but has since shifted into a one-stop shop for a slew of services, including cloud and streaming services, as well as logistics. The recent move to acquire Kaola not only contributes to Alibaba’s prowess, but helps prevent Amazon from strengthening its position in the market, after the US giant was rumored to have been interested in acquiring Kaola. It’s new stake in Cloud Music will help it better compete against Tescent, while also pushing down operating expenses associated with its own service. 

What’s next? At an upcoming investor day meeting on September 23–24, the company may give more details on its balance sheet and forecasts for 2019.

Ahead of September’s event, 5-star RBC analyst Mark Mahaney maintains his Outperform rating on BABA stock, along with $210 price target, which implies about 20% from current levels. 

As always, we like to give credit where credit is due. According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, Mahaney has earned a yearly average return of 20% with a 61% success rate. Mahaney is ranked #70 out of 5,539 analysts. (To get Mahaney’s real-time updates, click here)

Maheney is not expecting “any negative change in annual guidance (over 500B RMB, +33% Y/ Y revenues FY20).” He believes management “will provide updated progress on BABA’s long-term Core Commerce strategy, which includes investments into tier-3 cities and below,” as well as updates on investments, and other business segments. Overall, the analyst expects “positive fundamental trends” continuing over the next few years, even with the current geopolitical uncertainty. 

All in all, in the eyes of Wall Street, Alibaba is a must-buy. Analysts expect Alibaba to only grow from here, as it continues to show strong growth in core e-commerce, while also investing heavily in startups around the world. TipRanks analysis of 16 analyst ratings shows a consensus Strong Buy, with all 16 analysts recommending Buy. The average price target among these bulls stands at $226.63, suggesting the stock can rise nearly 30%. (See BABA’s price targets and analyst ratings on TipRanks)


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