Recently, Ant Group—one of the biggest names in Chinese stocks in fintech—announced that it was planning to buy back over $6 billion worth of its own stock. A wide range of eyes then pivoted to Alibaba (NYSE:BABA), which owns a substantial quantity of Ant Group shares. Alibaba passed on any plans to sell off, and that sent shares blasting up over 5% at one point in Monday afternoon’s trading.
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So why is Alibaba holding on to its Ant Group stake? Based on a company filing, Alibaba is sitting back because Ant Group and Alibaba have been working together for quite some time. Ant Group is, according to Alibaba, an “…important strategic partner to Alibaba Group’s various businesses…” and will, accordingly, “…maintain its shareholding in Ant Group.” Given that Alibaba owns 33% of Ant Group—Ant Group was actually part of Alibaba a little over a decade ago—that’s a mark of confidence.
There’s another key point that might go unconsidered otherwise; Alibaba doesn’t need to sell off Ant Group. Certainly, Ant Group is a vital part of Alibaba’s operations. Ant Group runs Alipay, the Chinese mobile payments service, which is frequently used on Alibaba. But Alibaba might have turned to selling its Ant Group stake if it were hurting for ready cash. With Ant Group ready to pay, Alibaba could have raised any amount up to the limit of its stake. But despite a shaky macroeconomic picture, Alibaba is holding out.
Turning to Wall Street, Alibaba stock is considered a Strong Buy by analyst consensus based on 13 Buy ratings and one Hold. Further, with an average price target of $142.71, Alibaba stock offers investors a 47.21% upside potential.
