Investors are like fishermen; they all have a story of the one that got away. Take technology giant Apple Inc. (NASDAQ:AAPL), for example. If you had purchased $1,000 of AAPL stock back in 2005, your investment would be worth $11,930 today. The question is, can any other company repeat that performance over the next decade? I see the same potential in Alibaba Group Holding Limited (NYSE:BABA). Optimistic? Probably, but the odds of an Apple-like run in BABA stock are not as crazy as you might think.
Alibaba has a number of growth drivers that could propel shares to new heights in 2016 and beyond. While a 10-fold increase is certainly on the high end of possible scenarios, Alibaba stock could be the top tech trade of the next decade. Here’s why.
1. growth… Growth… GROWTH
Many investors think China was the story of the last decade, but this theme is not over yet. Today, China’s middle class totals 230 million people. By 2024, this number is projected to hit 630 million. (Source: “Michael Spence: China’s Rising Middle,” Stanford Business, May 8, 2014.) By 2030, some economists predict the figure will grow to 854 million, a roughly fourfold increase from today. (Source: “China’s rising middle class will create opportunities the world has never seen before,” Business Insider, May 14, 2015.)
Many people have a hard time trying to wrap their head around numbers like these. Put in simpler terms by the Brookings Institute, China could become the “world’s largest single middle-class market,” surpassing even the United States by 2020. (Source: “The New Global Middle Class: A Cross-Over from West to East,” Brookings Institute web site, last accessed November 18, 2015.) Alibaba, which has a stranglehold on the whole nation, has staked its claim on one of the biggest gold mines in history.
2. Alibaba Is More Than E-Commerce
All of the above would be impressive enough, but we must add that Alibaba stock is so much more than a play on Chinese e-commerce.
Many analysts believe Alibaba could overtake Amazon.com, Inc. (NASDAQ:AMZN) in the area of cloud computing within the next few years. Plus, we can’t forget about the company’s recent forays into the mobile, banking, and video streaming fields. All of these divisions could be billion-dollar-plus businesses.
In order for Alibaba to match Apple’s performance over the next decade, the company will need to achieve a market capitalization between $1.0 trillion and $2.0 trillion by 2025. Alibaba’s e-commerce business alone could achieve this feat. Once you start to add up all of the other projects BABA CEO Jack Ma is working on, the target for BABA stock starts to seem downright conservative.
3. The Smart Money Is Buying
Some of the world’s smartest money managers are betting big on Alibaba stock. Over the past few quarters, billionaire tycoon Robert Citrone has accumulated a $536.7-million position in BABA stock. A number of respected hedge funds, including Eagle Capital Management, Renaissance Technologies, and Blue Ridge Capital, initiated or increased the size of their BABA stock positions last quarter.
What could the excitement from all of these industry players surrounding BABA stock mean? I’d say it could mean only mean one thing: they see a giant rally in Alibaba stock coming.