BABA stock forecast: Is Alibaba stock a good buy?

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How is the BABA stock forecast shaping up after an epic 2021 Singles’ Day?

The Alibaba share-price forecast is a bit of a mixed bag at the moment due to several factors. The coronavirus pandemic and 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 was a big month for BABA stock news, thanks to the annual shopping frenzy that is Singles’ Day – an unofficial holiday held annually on the 11th, in which the unmarried 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. It is 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 thirteen year of the flagship promotion. The company said it generated $84.5bn in gross merchandise volume over the 11 days culminating in 11 November. A record 290,000 brands participated. The bad news? Year-on-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 during Prime Day, which was brought forward to the middle of October in 2020 owing to Covid-19. Amazon generated sales of $10.5bn 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 is a fraction of what its Chinese counterpart commands year in and year out. The Hangzhou, China-based company said it took in $38.6bn for the quarter ended 31 December 2021, up 10% year-on-year.

In addition, Alibaba’s international commerce accounted for $2.58bn. It counted 1.28 billion annual active consumers across its ecosystem, up 43 million from the previous quarter. Broken down, its current customers include 979 million in China and 301 million overseas (up 26 million and 16 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 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 $3.06bn, and the company firmly believes that this will continue to be a major contributor to its global growth. To that end, it showcased its services during the Beijing 2022 Winter Olympics as a global sponsor of the Games.

As Daniel Zhang, chairman and CEO of Alibaba Group, said in February 2022:

“Alibaba delivered steady progress this quarter as we continued to execute our multi-engine growth strategy in a complex and volatile market environment. We achieved positive momentum in key strategic businesses through a disciplined focus on capacity building and value creation to fuel our future growth.”

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.

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But of course, there is always a real risk of saturation when you solely focus on urban areas and you report the slowest growth since going public in 2014. As such, the market was unenthused; a day after results were released on 24 February, prices had fallen by 6%.

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.

Alibaba stock: Buy or sell?

Alibaba Group Holding Limited
Daily change
Low: 82.64
High: 85.55

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 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 e-commerce giants such as rival Tencent are no longer allowed to enter into exclusive deals with brands amid fears this could disproportionately affect smaller businesses.

In April 2021, 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 led to an 11.3% decline in prices. Later in the month, Alibaba sold its 5% share in Mango SuperMedia for a loss to further mollify regulators.

At the time of writing, BABA stock was trading at about $108 – way down from its $270 peak a year earlier.

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

A consensus of 55 analysts polled by CNN Money gave BABA a “buy” rating. The 49 analysts who offered 12-month price predictions settled on a median $180.66, with a range from $284.70 on the high end and $134.86 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.

Is Alibaba stock a good buy?

A consensus of analysts gave BABA a "buy" rating and predict it will approach almost $181-per-share over the next 12 months.

Will Alibaba stock go up?

Some of the same analysts believe BABA could reach almost $285, while others believe it could fall all the way down below $135. The global economy is recovering as mass-vaccination continues, but the global supply-chain crunch and the war in Ukraine could continue to hold it back.

Should I buy Alibaba stock?

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. 

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