1 Wall Street firm thinks Alibaba stock will go to $99. Is it a purchase?
Bank of America expects Alibaba’s sales to beat consensus estimates when it reports fiscal fourth-quarter results on Tuesday.
Alibaba (Baba 5.70%) After falling to its lowest point last year, the stock price began to show signs of recovery. The stock is up 19% in the past month, and there’s more gains to come.
bank of america Analysts recently maintained a Buy rating on the stock but lowered their price target from $102 to $99. However, this still implies an upside of 17% over the next 12 months from the current share price.
Reasons to buy Alibaba stock
BofA analysts expect Alibaba’s total revenue to rise 6% year-over-year in the fiscal 2024 fourth quarter ended March, a slight acceleration from the 5% growth in the third quarter. Keep in mind that BofA’s estimates are higher than the Wall Street consensus, which expects the company to report year-over-year growth of 4.3%.
Alibaba may be starting to show early signs of recovery. In its previous earnings call last February, management acknowledged a more competitive pricing strategy to benefit healthy margins from active buyers and order volume. We had to contend with increasingly fierce competition. PDD Holdings‘ Temu Marketplace uses low retail prices to attract customers and achieve explosive revenue growth.
However, Alibaba is a hugely profitable business as it generates most of its revenue from service fees and selling fees on Tmall and other retail marketplaces. Alibaba’s deep pockets could ultimately give it an advantage in China’s retail market.
Most analysts are skeptical. The consensus is that Alibaba is growing its earnings at a 10% annual rate, which makes the stock’s future price-to-earnings ratio of 9.9 look like a steal.
Even if the stock rises another 17%, its forward P/E would still be cheap, which increases the likelihood that the stock will soon reach BofA’s price target, assuming the company continues to report retail sales growth. Investors will get the next update on Alibaba’s progress when the company reports its fiscal 2024 fourth quarter results on Tuesday, May 14, before the markets open.
Bank of America is an advertising partner of The Ascent, a Motley Fool company. John Ballard has no positions in any of the stocks mentioned. The Motley Fool has a position at and recommends Bank of America. The Motley Fool recommends Alibaba Group. The Motley Fool has a disclosure policy.
