US-China relations are on the skids. The already fraught relationship between the world’s economic superpowers has recently taken a turn for the worse. The coronavirus, TikTok, Huawei, trade – you name it – the two global giants are at loggerheads.
What this means is an extra dollop of volatility and uncertainty for US-listed Chinese stocks. However, taking the macro elements into consideration, Oppenheimer analyst Jason Helfstein argues Chinese internet giant Alibaba (BABA) remains well positioned to continue its success. Going by recent data, Helfstein has reason to be confident.
According to the National Bureau of Statistics (NBS), sales of online physical goods were up by 25% year-over-year in June, compared to 22% and 16% in May and April, respectively, indicating “continued acceleration.” Boosted by COVID-19 tailwinds, e-commerce penetration – online physical goods GMV (gross merchandise volume) as a percentage of total retail – climbed to 29% in June, a year-over-year increase of 6%, compared to a 2% and 4% uptick in 2019 and 2018, respectively.
“We believe the penetration increase is sustainable, as new buyers appreciate convenience and existing buyers expand purchasing categories,” Helfstein said.
There is more data to back up Helfstein’s thesis. In Q2, express parcel volume was up by 37% year-over-year, as opposed to just a 3% increase in Q1, according to State Post Bureau (SPB). To Helfstein, these trends indicate how e-commerce adoption is accelerating, with Alibaba, naturally, as the main beneficiary.
Summing it all up, the 5-star analyst said, “Our positive thesis is based on the company’s unrivaled dominant position in its core business, its pioneer ecosystem that creates a long-standing barrier to entry, and numerous drivers, including enhancing monetization and stable GMV growth outlook, as well as new growth opportunities like rural/ cross-border/cloud/logistics.”
Accordingly, Helfstein maintained an Outperform rating on BABA shares and boosted the price target from $260 to $290. What’s in it for investors? Possible upside of 14%. (To watch Helfstein’s track record, click here)
Overall, there’s no doubt Alibaba remains a popular pick on Wall Street. BABA’s Strong Buy consensus rating is based on 19 Buys and 1 lone Hold. The analyst community expects shares to appreciate by nearly 10% over the next year, as indicated by the $279.84 average price target. (See BABA stock-price forecast on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.