BABA stock forecast: Is Alibaba stock a good buy?

After a blockbuster Singles’ Day that generated $84.5bn of sales in 2021, how is the Alibaba stock forecast shaping up?

The Alibaba (BABA) share-price forecast is a bit of a mixed bag at the moment due to several factors. The coronavirus pandemic and the global supply-chain crunch continue to provide a challenging trading environment, and the e-commerce giant is coming under renewed regulatory pressure at the hands of the Chinese government. Nevertheless, analysts remain upbeat about the stock's future.

November is a big month for Alibaba stock news, thanks to the annual shopping frenzy that is Singles’ Day – a national holiday held on 11 November each year, in which all unmarrieds in China reward themselves with gifts. According to Investopedia, the idea began in 1993 and has since spread around the world, becoming the world’s largest online shopping day – branded the “Double 11“ or “11.11 Global Shopping Festival”, as Alibaba refers to it, as pent-up consumer demand results in a spending spree every year on 11.11.

Alibaba’s records were smashed in 2021, the 13th year of the flagship promotion. The company said it generated $84.54bn in gross merchandise volume over the 11 days culminating in 11 November. A record 290,000 brands participated. The bad news? Year-over-year growth was only 8.45%, the lowest since its debut.

To understand why Alibaba stock-price predictions remain rosy despite headwinds, contrast its performance with Amazon’s (AMZN’s) during Prime Day, which was brought forward to the middle of October in 2020 owing to Covid-19. Amazon generated sales of $10.5bn (£7.8bn, €5.3bn) during its major annual promotion, a sum exceeded by the June dates in 2021 at $11.9bn. Although this is impressive in its own right, it’s a fraction of what its Chinese counterpart commands year in and year out. The Hangzhou, China-based company said it took in $31.147bn for the quarter ended 30 September 2021, up 29% year-over-year.

In addition, Alibaba’s international commerce accounted for $2.342bn. It counted 1.24 billion annual active consumers across its ecosystem, up 62 million from the previous quarter. Broken down, its current customers include 953 million in China and 285 million overseas (up 41 million and 20 million, respectively).

But of course, Alibaba has also expanded its offering, and is now so much more than online shopping – in addition to its buoyant cloud computing division and rating as the world’s fifth-largest artificial intelligence (AI) company, it is also one of the world’s biggest investment corporations and venture capital firms. In addition, it has stakes in entertainment and internet services, and plans to further expand its media interests.

Over the same financial period, demand for these services grew to $3.105bn, and the company firmly believes that this will continue to be a major contributor to its global growth.

As Daniel Zhang, chairman and CEO of Alibaba Group, said in June 2021:

“We believe in the growth of the Chinese economy and long-term value creation of Alibaba, and we will continue to strengthen our technology advantage in improving the consumer experience and helping our enterprise customers to accomplish successful digital transformations.”

BABA stock forecast: changing strategies

The flurry of upbeat Alibaba stock-price predictions reflects how the company has managed to adapt to changing consumer shopping habits.

BABA was better placed to handle large volumes of online deliveries than many of its competitors, even during the height of lockdown restrictions. A powerful illustration of the infrastructure it has in place came from Cainiao, Alibaba’s logistics division, which revealed it had chartered 3,000 flights and amassed a team of three million people to ensure that packages could be delivered to shoppers in a Covid-secure way.

One of the company’s top priorities has been “continuing to grow consumer mindshare and wallet share” among users in affluent cities – ensuring they are spending more and making purchases more frequently.

But of course, there is always a real risk of saturation when you solely focus on urban areas. A such, the market was unenthused; when results were released on 19 November, prices fell by 11%.

Analyst expectations amid other issues

JP Morgan’s Wall Street analyst Alex Yao told clients that Alibaba should have stepped up investment when new innovations emerged in e-commerce.

“However, from a group perspective, we think some of the early investments (cloud, fintech, logistics, etc) will start to bear fruit and should more meaningfully drive the share price in the next few years,” said Yao, who cut his Alibaba stock prediction from $255 to $210.

Baird analyst Colin Sebastian cut his Alibaba stock prediction from $260 to $180, saying that he saw “few near-term positive catalysts for shares”.

As Sebastian told clients, Alibaba faces an evolving competitive environment and “continues to face more intense competition in both high-tier cities/more-developed regions and less-developed rural areas”.

China, the world’s second-largest economy, continues to face headwinds, with millions of university graduates struggling to find work.

Figures suggest that the bounceback in consumer spending has been patchy, to say the least – and while there was plenty of growth in the financial hub of Shanghai, the BABA stock price actually fell in rust-belt provinces such as Jilin in China’s northeast.

Also, rolling lockdowns in the autumn of 2021 meant an increased need for containing Covid-19 flare-ups, especially with next February’s Winter Olympics in Beijing rapidly approaching.

Alibaba stock: Buy or sell?

Alibaba Group Holding Limited
Daily change
124.51
Low: 121.73
High: 126.68

Alibaba share-price news has also reflected some recent, high-profile setbacks. As we mentioned earlier, regulators in China are beginning to pay closer attention to business giants such as BABA. Shares tumbled substantially when Beijing slammed the brakes on the planned $34bn initial public offering (IPO) of Ant, one of Alibaba’s subsidiaries.

In addition, Alibaba’s charismatic founder Jack Ma was mysteriously forced to step back as the public face of the company. The company experienced a blowback from planned new antitrust rules, which means it and the country’s other ecommerce giants such as rival Tencent (OLEA) are no longer allowed to enter into exclusive deals with brands amid fears this could disproportionately affect smaller businesses.

In April, Alibaba was hit with a $2.8bn fine for monopolistic practices. More regulations followed in August to curb collusion among Chinese tech giants. In September, worries about debt-soaked real-estate giant Evergrande (EGRNF) led to an 11.3% decline in prices. Later in the month, Alibaba sold its 5% share of Mango SuperMedia for a loss to further mollify regulators.

At the time of writing, BABA stock was trading at about $140 – way down from its $270 peak in February.

With all of this in mind, let’s take a look at the Alibaba stock-price forecast going forward.

A consensus of 46 analysts polled by CNN Money gave BABA a “buy” rating. The 44 analysts who offered 12-month price predictions settled on a median $209.85, with a range from $333.93 on the high end and $35.86 on the low end.

As China imposes further restrictions on big companies – namely concerning how customer data is used – this is likely to continue to be an issue. However, as one of Beijing’s main priorities will be returning the economy to full health post-Covid, the likes of BABA will be instrumental in delivering this recovery and getting its consumers back into spending.

A consensus of analysts gave BABA a "buy" rating and predict it will approach $210-per-share over the next 12 months.

Some of the same analysts believe BABA could reach more than $333, while others believe it could fall all the way down below $36. The global economy is recovering as mass-vaccination continues, but the global supply-chain crunch could continue to hold it back.

BABA is a brand well-known in China, the world's second-biggest economy, and has built a following elsewhere around the globe, which may make it an appealing prospect for some investors.

However, it is essential to do your own research before investing in anything. Fluctuations in stock prices are normal and you should only invest as much as you are willing to lose. 

Further reading

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