Original Publish Date: March 22, 2018
Alibaba has recently increased their 2016 stake in Lazada, a South Asian e-commerce company, to $4 billion in an attempt to compete with competition giants such as Amazon. Baba has also taken a 33% equity stake in Ant Financial, the leading payment processor in the region. With these strategic partnerships, Alibaba is now in a prime spot to access more of the 640 million consumer base consisting of an expanding middle class and high smartphone use. Furthermore, their rapidly expanding cloud network has seen growth over 100% year-over-year contributing about $2B to their revenue stream. While this is far from Amazon or Google, the rate that they have expanded so far shows a positive future.
With buy-strong buy signals across the analyst board, a consensus price target of 220, and strong earnings growth, the dip Baba has taken with a tech industry generalized sell off into the low to mid 190s appears to be a prime opportunity to establish a long position.
Current risks could involve weaker than anticipated earnings growth and/or unforeseen complications in these partnerships.
Disclosure: I am/we are currently long on BABA.
This article expresses my own opinions. I am not receiving compensation for this article – other than from Honey Investments. I/we have no business relationship with any companies whose stock is mentioned above.