To get an accurate Alibaba stock price prediction for 2020, it’s worth reflecting on the blockbuster year that the Chinese e-commerce giant has just enjoyed.

The company has successfully completed a secondary listing on the Hong Kong stock exchange, in what is comfortably the biggest initial public offering of 2019. It raised $11.3bn during the hotly anticipated debut on November 26, then an additional $1.68bn on December 6 by listing 75 million over-allotment shares.

For its colourful co-founder Jack Ma, this was nothing short of a personal victory. He first wanted to go public in Hong Kong in 2013, but Alibaba had to abandon the plans because the exchange wouldn’t allow the firm to handpick board members. Alibaba ended up listing in New York, thousands of miles away from its headquarters in the Chinese city of Hangzhou.

Some market watchers claim Hong Kong relaxed its rules surrounding corporate governance specifically to entice Alibaba back. Given the widespread unrest triggered by pro-democracy protests in the territory, which have hit the economy hard, the Alibaba stock news has been regarded as a massive vote of confidence in the region’s financial system. Significantly, investors on the Chinese mainland could finally have their first chance to make an Alibaba investment in six months.

The Alibaba share price forecast has also been buoyed by the company’s resilient performance during Singles’ Day – the biggest retail event on the planet. An estimated 500 million shoppers take part in the extravaganza every year, which was designed as an antidote to Valentine’s Day for people who aren’t in a relationship. Official Alibaba figures show that it generated $38bn in sales on November 11 – clearing $1bn in just 68 seconds. For context on how dominant the brand is, compare this with Amazon’s $5.8bn takings on its flagship Prime Day.

What Alibaba is worth

Based on the Alibaba share price at the time of writing, the company’s market capitalisation on the New York stock exchange stands at $533bn. This positions the retail behemoth as one of the few publicly listed companies to have a cap above $500bn, and only the second Chinese brand to reach this coveted milestone.

And let’s take a quick look at the company’s financials, too. In the year to May 2019, Alibaba generated $13.9bn in revenue – an increase of 51 per cent compared with last year. Net income for the 12-month period stood at $3.48bn.

The business model

Alibaba is a Chinese business group with its fingers in many pies and to think of it as an entity offering a single service would be disingenuous.

The company’s first venture was Alibaba.com, now described as “China’s largest integrated international online wholesale marketplace”. This website is primarily focused on connecting wholesalers and retailers in 190 countries with manufacturers and small to medium-sized businesses on the Chinese mainland. A consumer-facing venture, known as AliExpress, made its debut in 2010 – giving shoppers the chance to cut through intermediaries and buy directly from Chinese distributors at lower prices. This service is especially popular in Russia, the US, Brazil, Spain and France.

Elsewhere in its expansive operations are Alibaba’s domestic brands. While m-commerce platform Taobao vies to deliver “personalised shopping experiences” to the Chinese market, Tmall is the gateway that major international retailers use in order to build virtual shopfronts designed to woo this lucrative market. To give you an idea of its influence, Kim Kardashian West was among the A-list celebrities involved in live-streaming on Tmall during Singles’ Day.

Overall, the group had 693 million active online buyers in Q3 2019. That’s more than the entire population of the US… twice over. Figures also suggest that it has a 58 per cent share of the e-commerce market in China, a level of penetration that the likes of which Amazon can only dream.

Alibaba share price history

To look at the potential of an Alibaba long-term investment, it is perhaps best to assess the performance of the company’s shares on the NYSE. The company’s IPO in 2014 was the biggest ever seen on record and raised $25bn – comfortably ahead of Visa on $19.7bn. Shares were sold at $68 apiece and, five years on, they are trading just above the $200 mark. This is close to the all-time highs of $208 achieved back in June 2018.

By and large, Alibaba stock growth has been resilient despite the ongoing trade war between the US and China. Although share prices did take a bit of a hit as each economic superpower slapped tit-for-tat tariffs on the other, the company’s shares haven’t suffered a detrimental impact over the long term.

When it comes to Alibaba stock growth in Hong Kong, it’s worth bearing in mind that it’s very early days. The IPO price stood at about $22.50 and, at the time, eight Hong Kong shares were the equivalent of one US share in the e-commerce giant. Although the share price on this local exchange ballooned to about $26 in the 48 hours after the listing went live, prices have since cooled to $24.90 at the time of writing. This still represents a healthy premium on their debut.

Alibaba share price forecast for 2020

So: what is the Alibaba stock price prediction as we venture into a new decade? In a nutshell, there are bold predictions that prices are going to explode.

Citigroup analyst Alicia Yap believes that Alibaba’s shares on the Hong Kong exchange have the potential to rise to $36.29. According to Barron’s, such a result would be 44 per cent higher than their closing price on December 6. She also set a target price of $284 for Alibaba’s American depository shares, a 41 per cent increase from the $201 recorded on the NYSE on the same date.

This isn’t the only Alibaba stock forecast that’s brimming with optimism. Goldman Sachs has a firm “buy” rating on the company’s Hong Kong stock – predicting that prices could rise by 31 per cent over the course of 2020.

Growth factors and potential disruptors

If you’re weighing up an Alibaba investment, it’s worth diving deeper and exploring the strengths and weaknesses facing the company as 2020 beckons.

Alibaba’s strength in the Chinese market is undisputed and brands such as Taobao and Tmall have established a robust presence in the large, profitable market. Its emphasis on e-commerce has meant that it’s more resilient to the online revolution than many others and it accounts for an enviable 82 per cent of overall revenue. Better still, turnover is continuing to enjoy double-digit growth – that said, growth in the Chinese company is beginning to experience a slowdown.

When it comes to potential disruptors, bear in mind that Alibaba still has a limited presence outside its native China. Sure, it does have some international traction, but mention “Alibaba” to most Western members of the public and they wouldn’t know what you’re talking about. The company will continue to face firm competition in its sector and it’s not unfathomable that a newer, more attractive upstart could swoop in and gobble up cherished market share.

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