Buy Alibaba stock because $130 is around the corner, says top analyst

It’s all to change Alibaba (NYSE:BABA). In the biggest realignment of the organization in its 24-year history, the Chinese e-commerce giant announced that it will split its business into six distinct groups (Cloud Intelligence Group, Taobao Tmall Commerce Group, Local Services Group, Cainiao Smart Logistics, Global Digital Commerce Group and Digital Media and Entertainment Group).

Each group will have its own CEO and Board of Directors. Everyone will also be able to raise debt capital and seek an initial public offering (IPO) — except for Taobao Tmall Commerce Group, which will remain wholly owned by Alibaba Group.

The company’s radical restructuring comes just a day after founder Jack Ma made a rare public appearance, and the government has hinted it could ease regulatory pressure on the internet industry.

Truist analyst Youssef Squali echoes the company’s statement that the move is designed to stimulate competitiveness and unlock shareholder value, and agrees that it may indeed be the case.

“We think this is an essential step in unlocking shareholder value by spinning off companies like Cloud, Cainiao, which should achieve attractive valuations as separate entities, and by injecting leverage to help offset some of the losses on the newer initiatives.” such as Local Services and DME in an effort to protect margins and improve FCF production, which has been a focus for shareholders,” said the 5-star analyst.

That way, companies will have “greater autonomy and flexibility,” while Squali also believes it could “diversify risks” due to uncertainties surrounding US-China tensions and still uncertain regulatory issues from local government.

Aside from the reorganization efforts, Squali also believes that despite a slow start to the March quarter, demand trends “have improved materially since the economy reopened, driving positive Y/Y growth.”

Given the company’s “attractive” long-term outlook, Squali reiterated a Buy rating on BABA stocks, along with a $130 price target. The consequences for investors? Potential upside of 30% from current levels. (To see Squali’s track record, Click here)

All Squali colleagues agree; The stock maintains a Strong Buy consensus rating based on 18 unanimous buys. The average target is $148.35, which leaves room for gains of ~48% over the one-year period. (See Alibaba Stock Forecast)

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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is for informational purposes only. It is very important that you do your own analysis before making any investment.

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