Alibaba Stock Has Incredible Growth Runway Ahead

Chinese eCommerce giant Alibaba (NYSE:BABA) stock has moved sluggishly in the past few months.

Alibaba Group (BABA) headquarters sign located in Hangzhou China
Source: Kevin Chen Photography /

BABA stock has dropped roughly 8% of its value in the past couple of months.

The Chinese government’s crackdown on big tech companies, including Alibaba, has weighed in on the stock. However, the fear that China would cripple its tech superstars is misplaced.

Regulatory concerns aside, Alibaba continues to grow at an impressive pace and is aided by the rising middle class in the country.

The big concern for investors from a technical perspective is whether the stock can break past the $300 barrier.

It was trading as high as $271 in February this year and was perilously close to the $300 mark. However, since then, BABA stock has taken a hiding and averaged $215 in the past month. It trades today around $209.

Analyst price targets point to a more than 42% over its current price, suggesting that the stock is trading at a massive discount. Based on its stellar outlook and robust fundamentals, it’s worth investing at current levels.

Alibaba’s Illustrious Growth Story

Alibaba has been a juggernaut in the eCommerce realm with an impeccable earnings track record.

In each of the years since 2013, its annual revenues have risen by at least 25%. In the past five years, its annual revenues have risen at an average yearly rate of over 48%.

Moreover, its gross profit margins have risen by a minimum of 10% since 2013 on a year-over-year basis. Additionally, it has had just one year, where its net income declined from the prior-year period.

The company achieved a whopping one billion annual active consumers in the fiscal year 2021. Roughly 78.7% of these customers were from China, while the rest from outside China.

Alibaba will continue playing a pivotal role in supporting growth within the Chinese economy, benefiting from digitalization in all aspects of life.

The country will become the largest economy by 2028, and its per-capita income should rise by 50% from 2020 to 2025. Moreover, by the end of 2022, its middle-class is expected to expand to 550 million people, which is more than the entire U.S. population.

Cloud Computing Prospects

Cloud computing has been the talk of the town in the tech world for the past several years now.

Business landscapes have evolved immensely with the advent of the cloud, and cloud providers are raking in millions of dollars in revenues. For instance, Amazon Web Services (AWS) has generated a dumfounding $45.37 billion in the past year.

Cloud infrastructure is still in its early days in China, as the total spending is around $15 billion.

However, in the first quarter, cloud infrastructure services in the country grew by a massive 55% on a year-over-year basis.

As a result, it became the second-largest market behind the United States in cloud investment. This naturally serves as a massive growth runway for Alibaba cloud.

Alibaba has already been killing it with its cloud business. It has a 39.8% market share in the Chinese cloud infrastructure services as of the first quarter of this year.

Cloud infrastructure spending has risen by over $2.3 billion in the past six quarters in China. Alibaba will have an even higher chunk of cloud spending going forward.

Final Word on BABA Stock

BABA stock’s flight has been impeded due to the Chinese government’s clampdown against the country’s tech giants.

However, a lot of those concerns are far-fetched and should not impact its long-term bull case. Alibaba has been growing its revenues at a tremendous pace in the past several years.

Moreover, it has multiple catalysts across many of its keys business segments, especially its cloud business. Hence, BABA stock is a buy despite regulatory concerns.

On the date of publication, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

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