The e-commerce giant has strong tailwinds propelling it forward…
2019 has been full of ups and downs for the Chinese e-commerce company Alibaba. Investor enthusiasm has tempered recently, largely thanks to trade war concerns and China’s economic slowdown. And as of this publishing, the company’s shares are down 13% year to date.
But in spite of these short-term headwinds, Alibaba’s fundamentals remain strong going forward. Here’s what’s working for Alibaba…
Analysts Are Optimistic When It Comes to Alibaba
The interesting thing about Alibaba is how favorably investors seem to look upon it. On Monday, a Jeffries analyst initiated Alibaba with a buy rating, saying the company is likely to benefit from short-term seasonal trends.
This sort of rating is the norm for Alibaba. According to The Wall Street Journal, 45 analysts are currently covering the company, and all of them have given the company a hold rating or higher. And while Alibaba’s shares are currently sitting at $154.98, its average price target is $218.33.
The Company Leads the E-Commerce Industry
Alibaba accounts for nearly 56% of the Chinese e-commerce industry. JD.com is Alibaba’s closest competitor but still only controls 17% of the market share.
And what’s most exciting about Alibaba is how quickly the company is growing. And it’s not just growing in China — it’s poised to expand internationally.
The company will soon allow U.S. sellers to sell their items on its marketplace. Once U.S. businesses can easily sell to Chinese markets, this could be a game-changer for Alibaba.
Alibaba’s Cloud Computing Business Is Growing
The company’s e-commerce business accounts for most of its revenue, but the company is quickly expanding into cloud computing as well. Cloud computing accounts for less than 10% of Alibaba’s revenue but this is expected to change.
In 2018, its cloud computing revenue grew by 84% year over year. And Alibaba’s cloud business currently accounts for more than 50% of the market share in China. This can be a major driver of the company’s growth going forward.
