The Bullish Case for Alibaba Stock
Alphabet Inc (NASDAQ:GOOG) may be the top Internet play here, but across the Pacific Ocean, Alibaba Group Holding Ltd (NYSE:BABA) dominates the e-commerce landscape and has the vision and determination to further succeed. BABA stock has nearly doubled from its 52-week low and the outlook looks bright.
Alibaba stock, which has been on the “death list” of some short sellers, is continuing its growth, leaving behind those same short sellers, who are currently sucking air.
Of course, one of the most outspoken short sellers is Jim Chanos, who firmly believes BABA stock is destined for the dumpster, suggesting that the company’s accounting is extremely shady and worse than the massive wrongdoings at Enron.
Chanos was bearish in 2015 and continues to try to talk Alibaba Group Holding Ltd down. However, I’m not sure anyone is listening, based on the supercharged rally in BABA stock. Now his opinion may turn out to be true, but for now, Alibaba stock is sizzling.
Foremost is the belief that Alibaba Group Holding Ltd is factual in its accounting. If you adhere to this view, then Alibaba stock will likely continue to be an Internet growth story not only in China and Asia, but also expanding its presence outside of Asia.
Co-founder and current Alibaba Group Holding Ltd Executive Chairman Jack Ma has long been regarded by many as the “Steve Jobs of China.” He has vision and a hunger to succeed.
Alibaba Group Holding Ltd currently has about 434 million active shoppers in its vast e-commerce network. In June, there were 427 million mobile monthly active users.
Chart courtesy of StockCharts.com
BABA stock has been garnishing kudos from Wall Street. Over the past 30 days, there have been five higher earnings-per-share (EPS) revisions for this year and another five upgrades for 2017. (Source: “Alibaba Group Holding Limited (BABA),” Yahoo! Finance, last accessed September 23, 2016.)
UBS raised its price target on Alibaba stock to $124.00, while Stifel increased its target to $125.00. (Source: “Alibaba (BABA) Stock Advancing, Analysts Raise Price Targets,” TheStreet, September 22, 2016.)
This will Make Alibaba Great
The growth metrics shown by Alibaba have been impressive. In the second quarter, revenues grew at 59% year-over-year to $4.83 billion, representing the highest growth rate for Alibaba stock.
While the China marketplace generated $3.52 billion in revenues, what was impressive was that revenues via mobile accounted for $2.63 billion, or 75% of total revenues, up 119% year-over-year.
A closer look at the financials of Alibaba Group Holding Ltd show the growth in the cloud segment with 577,000 paying customers, which drove cloud revenues up 156% to $187.00 million. (Source: “Alibaba Group Announces June Quarter 2016 Results,” Alibaba Group Holding Ltd, August 11, 2016.)
The cloud could become a major revenue stream for BABA stock as the company intensifies its focus on launching new cloud products not only in China, but In Japan and South Korea as well.
In the second quarter, 319 new cloud products where offered, including advanced storage, big data, and security.
Another intriguing project for Alibaba stock is the company’s desire to expand its presence in the automobile market. Alibaba, via its “YunOS” unit, recently entered into a venture with Shanghai Automotive Industry Corporation, wherein Alibaba stock will offer some of its services via a vehicle’s Internet platform. (Source: Ibid.)
The bottom line is that bears such as Chanos have so far been wrong, and if Alibaba Group Holding Ltd can avoid a misstep, the future looks bright.