Alibaba founder and executive chairman Jack Ma often makes exaggerated claims. But most of the times he means what he says, and that’s the reason the Wall Street takes him seriously. Ma recently said during his visit to the United States that Alibaba would clock $1 trillion in annual merchandise sales by 2019. While that may raise eyebrows in some quarters, analysts believe that the Chinese e-commerce giant can easily achieve that goal.
Alibaba can easily achieve $1 trillion GMV
Wedbush Securities analyst Gil Lauria told The Street that Alibaba is not far from that goal. Last year, the company sold goods worth $394 billion, up 46% from the previous year. Lauria said a 40% growth would double that figure in about two years. So the trillion-dollar goal is pretty realistic.
However, Enderle Group analyst Rob Enderle said Alibaba may find it difficult to scale up to become a trillion-dollar online system. The company is going to run into “serious scaling issues” much before they can clock the $1 trillion run rate, added Enderle. Jack Ma was in the U.S. to lure American small businesses to sell their goods to Chinese consumers via Alibaba’s platforms.
Alibaba to help break down international trade barriers
During a meeting with small business owners in Chicago on Wednesday, Ma pushed the Internet as a friend rather than an enemy of small businesses. Ma said he viewed Alibaba has an electronic World Trade Organization (e-WTO) for small businesses across the globe. Alibaba will help break down trade barriers through e-commerce. He told an audience of about 300 that 95% of firms that sell goods through Alibaba are small businesses.
According to McKinsey, China’s middle-class is expected to grow to 630 million by 2022, and most of them prefer buying foreign goods due to quality and reliability issues with local products. Ma said that over 120 million shoppers visit Alibaba sites daily. According to Bloomberg, he aims to increase the percentage of revenue coming from outside China to 40% of the total, up from just 2% last year.
On Thursday, HSBC slashed its price target on Alibaba from $136 to $124, though it maintained a Buy rating on the stock.