Alibaba (BABA) wasn’t spared 2020’s turmoil and saw out the year facing increasing scrutiny. First, the regulators halted its sister company Ant Financial’s mooted November blockbusting IPO, then the government announced an investigation into Alibaba’s alleged anti-competitive behavior. Questions were then asked as to the whereabouts of Alibaba and Ant Group founder Jack Ma, who had not been seen in public since October, when Ma’s speech criticizing the Chinese regulators appeared to ruffle some feathers and kicked off the events mentioned above.
So, what does it all mean for the e-commerce giant’s global spanning business? For Needham analyst Vincent Yu, there has been no breach to the bull case. Addressing the “elephant in the room,” the analyst believes whatever the regulators’ decision, it won’t have that much of an impact in the long term.
“From our perspective,” the analyst said, “We believe Alibaba’s core e-commerce business operates in a highly competitive and multi-polar industry, and users of different e-commerce platforms often look for different values. We believe Alibaba’s access to over 880 million MAUs will remain a competitive edge even if exclusive deals were to be banned due to regulations.”
Yu also thinks the fiscal third-quarter “could prove to be an investment period for the company.” This line of thought is based on the the fact that during November’s Global Shopping Festival, promotions kicked off earlier than in previous years, while the updated Taobao Mobile feed’s monetization efforts are “still restrained.”
The period has also been marked by an increasing focus on community buying – a growing trend where buyers pool together to reduce last-mile delivery costs.
“In terms of the business infrastructure,” Yu noted, “Alibaba looks to leverage Cainiao’s over 80,000 Cainiao Post locations as storefronts for consumers to pick up community buying orders, and Freshippo’s 232 store locations and Sun Art’s 484 locations as local product suppliers.”
All in all, there’s no change to Yu’s rating which stays a Buy, while the $330 price target stays put, too. Investors are looking at upside of a strong 40%, should Yu’s thesis play out in the year ahead.
The Street remains unanimously behind Alibaba. All current ratings – 21, in total – say Buy, culminating in a Strong Buy consensus rating. The forecast is for ~42% upside over the next 12 months, given the average price target clocks in at $333.44.
Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.