If the U.S.-China trade tug-of-war has you feeling a bit motion sick, you’re not alone: plenty of investors are weary of trade-tension-driven market volatility and reluctant to take a position in a vulnerable asset like Alibaba (NYSE:BABA) stock. Still, with Wall Street generally leaning bullish on BABA stock and expectations running high for next month’s earnings report, could Alibaba shares be the perfect trading vehicle for what seems like an inevitable trade-war resolution?
Room for Appreciation in BABA Stock
The BABA stock price might seem a bit lofty, but if we take a step back and observe that it’s been above $200 per share before, it’s not hard to envision the shares reclaiming that level and beyond. If anything is capable of giving Alibaba stock that big push above resistance, it’s the aforementioned earnings announcement, which I believe has moon-shot potential for BABA.
Evidently, I’m not alone in this sentiment, as FactSet reports, the average EPS forecast for BABA is $1.50 for the quarter — about 28% higher than the year-ago quarter. And irrespective of the actual earnings results, TipRanks calculates the average analyst price target for BABA stock as $219.73, signifying 23% upside from the current share price. (Not that I’m one to blindly follow analyst predictions, but even if Alibaba stock is halfway as successful as predicted, that would still represent a decent gain.)
Opening the Floodgates
Besides a positive earnings surprise, what could really push BABA stock shares over the top is Alibaba’s olive branch amid trade tensions: opening their business-to-business platform to U.S. companies. By permitting American merchants to engage in global B2B transactions on Alibaba’s e-commerce platform for the first time, the company is not only promoting free trade, but it’s also posing serious competition to Amazon (NASDAQ:AMZN) in the multinational online business-to-business space.
As explained in an official statement from the company, U.S. businesses will be able to sell their products wholesale on Alibaba.com:
“Now, the nearly 30 million small and medium-sized businesses in the U.S. — especially manufacturers, wholesalers and distributors — can better access the $23.9 trillion global B2B e-commerce market, an opportunity that is six times larger than the global B2C e-commerce market.”
An Ambitious Vision
I’m not saying that Jeff Bezos should be shaking in his boots, but investors should be aware that Alibaba’s recent foray into the China-U.S. B2B e-commerce space is a shot fired directly at Amazon as well as top Chinese rival JD.com (NASDAQ:JD). In fact, inviting U.S. merchants to set up business-to-business shops could, according to Alibaba, double the number of international brands on the platform within the next three years. Right now, that number is around 20,000.
So yes, Alibaba will pose a serious threat to Amazon and JD.com through this year and beyond. Indeed, one-third of Alibaba.com’s B2B buyers are already based in the U.S., and many products are significantly cheaper on Alibaba’s platforms when ordered in bulk, making the company’s outreach to American merchants almost irresistible in some instances.
The Bottom Line on Alibaba Stock
Is Alibaba’s move into the U.S.-China online business-to-business market the manifestation of a vision of international peace and harmony? Let’s not kid ourselves. It’s 100% financially motivated, plain and simple… and I’m 100% okay with that.
I’m more than happy to let greed and competitiveness drive Alibaba -0-and just as importantly, BABA stock — to new heights as the trade war wends its way through another long, action-packed summer.
As of this writing, David Moadel did not hold a position in any of the aforementioned securities.
