If patience is not your virtue, Alibaba (BABA) might be trying. Gainsboro Capital (GC) blogger says the e-commerce company continues to see its top line grow rapidly – up around 55% year-over-year in 2Q19 in addition to a growing Alibaba Cloud segment. (To watch GC’s track record, click here)
The writer notes BABA has provided investors with “incredible” returns since the stock went public in 2014, but that shares have stagnated in the past year with a China – U.S. trade war making the situation even worse. Despite the recent noise, GC suggests holding on to BABA for the long-term.
“When looking at the penetration rates across their two core segments, as well as management’s most recent actions in the 2Q19 earnings report, we believe the firm is poised for years of value creation,” GC asserted.
When it comes to BABA’s cloud software, the blogger notes it has been nearly doubling YoY for the past few quarters, yet some are still not on board.
“Some critics argue that there are geographical restrictions limiting Alibaba’s potential. With Amazon’s AWS taking the cake in North America, this may be the case. Yet the cloud computing TAM excluding these key regions would still be lucrative for Alibaba. Even a humble market share would mean immense upside in Alibaba Cloud revenues,” GC added. “With shares trading at ~30x FY19 EPS, we believe there’s plenty of room for shares to run over the next several years – but as with many things in life, patience is required. Those seeking short-term profits should perhaps look elsewhere.”
GC targets the ‘critics’ in his piece, but it doesn’t seem there are too many analysts with opposing views. TipRanks finds out of 23 analysts who have rated the stock, all 23 are bullish. The consensus price target of $204.82 shows just about 29% upside from where BABA is currently trading. (See BABA’s price targets and analyst ratings on TipRanks)