Chinese e-commerce giant Alibaba (BABA), which successfully completed the biggest IPO ever just last month, is poised to become even more massive, according to investment research firm Jefferies. The investment bank initiated coverage of BABA stock today, blessing shares with a “buy” rating and a $118 price target.
Alibaba’s stock price closed at $95.76 on Friday, meaning the Jefferies’ price target implies upside of more than 23% from those levels. BABA stock was up 2% in early trading Monday.
After raising a record $21.8 billion in its September IPO and currently boasting a market capitalization of $245 billion, one might wonder how BABA could get much larger. After all, China is a big place but the company has been so dominant in that country that it holds an 80% market share in e-commerce by gross merchandise sales.
While this is true, Alibaba and its platforms only sell to about 25% of China’s overall population; Jefferies predicts that number will rise to more than 50% within a decade.
With Wall Street’s “quiet period” set to expire in just two days on October 29, expect a lot more analyst views to come to light. InvestorPlace‘s Tom Taulli explains what the end of the quiet period means:
“At that point, Alibaba’s underwriters — including Credit Suisse (CS), Deutsche Bank (DB), Goldman Sachs (GS), JPMorgan Chase (JPM), Morgan Stanley (MS) and Citigroup (C) — will be able to publish their analyst ratings.”
Taulli also mentions a number of potential catalysts ahead that could send BABA stock even higher. Initiatives in mobile search, a mobile app-development platform, cloud computing and China’s most popular payments service (Ant Financial) each show enormous promise.
Combine that with the fact that the Asian e-commerce behemoth is reportedly antsy to buy a huge stake in Hollywood production studio Lions Gate Entertainment (LGF), and it’s clear that Alibaba is not a one-trick pony. LGF and BABA already have a previous corporate relationship — the two companies teamed up back in July in an attempt to build a service similar to Netflix (NFLX) in China.
Say what you will about Alibaba. It’s corporate governance has been heavily criticized as comically unfair and some skeptics wonder whether China’s government will restrict its growth. But as long as Jack Ma & Co remain ambitious and focus on expansion, BABA stock could have a long runway.
As of this writing John Divine is long Jan 2016 $37 LGF call options. You can follow him on Twitter at @divinebizkid.