By Sarah Roden
Alibaba Group Holding Ltd (NYSE:BABA), the China-based e-commerce company, is still remembered for its record-breaking $68.00 IPO in September of this year. Alibaba quickly became a top valued technology company, ranking just behind Apple Inc. (NASDAQ:AAPL), Microsoft Corporation (NASDAQ:MSFT), and Google Inc (NASDAQ:GOOGL) (NASDAQ:GOOG), but in front of poster companies Facebook Inc (NASDAQ:FB) and International Business Machines Corp. (NYSE:IBM). Alibaba is back in the news this week because the e-commerce giant briefly surpassed Wal-Mart Stores, Inc. (NYSE:WMT) in market capitalization measures during trading hours on Tuesday, October 28th, and reached an all-time high of $100 a share.
Although Alibaba only fleetingly exceeded WalMart, investors believe it is a foretelling sign of Alibaba’s future success and ability to surpass WalMart. Alibaba’s sales are dwarfed compared to WalMart’s, but the Chinese e-commerce company is poised to expand its user base to 50% of China with the help of TMall, an e-commerce site operated by Alibaba. Additionally, Alibaba plans to capitalize on the growing demand for foreign brands in China.
Alibaba founder and CEO Jack Ma spoke at the Wall Street Journal Digital conference on Monday, October 27th in Laguna Beach, California. He mused about beginning in a relationship with Apple Pay. Ma also told the crowd that Alibaba currently boasts 100 million daily visitors, even though he admitted that he does not shop online.
On Wednesday, October 29th, Piyush Mubayi of Goldman Sachs initiated coverage on Alibaba with a Neutral rating and a price target of $102. Goldman Sachs is the only bank that isn’t outwardly bullish on the stock, but this is because of startling spike after the IPO. Mubayi explained, “Alibaba Group Holding Ltd (NYSE:BABA) dominates the world’s fastest growing e-commerce market… Near-term prospects appear well discounted, so we launch with a 12 month TP of US$102; however, with steady growth, we estimate equity value could appreciate to $133/share in two years, or a $350bn market capitalization.” Mubayi has a 54% success rating recommending stocks with an average return of +6.7% per recommendation.
Separately, on October 29th analyst Alan Hellawell of Deutsche Bank initiated coverage on Alibaba with a Buy rating and a price target of $112.70. Hellawell noted, “Alibaba marked the first stage of its evolution with the roll-out of a largely un-monetized and highly scalable platform… We see Alibaba pursuing ever deeper forms of monetization through business model shift, heightened competition for the advertising tools on its platform, and the introduction of a growing array of valuable ancillary services.” He concluded, “We initiate coverage with a Buy in expectation of further secular growth from core e-commerce, and view largely M&A-driven diversification as potential options to the business.” Hellawell has an overall success rate of 52% recommending stocks with an average return of +47.7% per recommendation.
To conclude, Alibaba has been impressing investors since its record-breaking IPO and again with its potential to overtake Wal-Mart, but can they sustain this momentum?
On average, the top analyst consensus is Moderate Buy.
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Sarah Roden writes about stock market news. She can be reached at [email protected].