Chinese e-commerce giant Alibaba (NYSE:BABA) is in a major transition period, and some experts on Wall Street are very bullish on BABA stock. Could shares actually double, though? If Alibaba is as deeply undervalued as one analyst group believes it is, anything is possible.
Earlier this week, Alibaba revealed its plans to divide into six separate businesses. The idea, according to the company, is to “unlock shareholder value and foster market competitiveness” (i.e., avoid antitrust probes from the Chinese government).
One of the six businesses, Taobao Tmall Commerce Group, will remain wholly owned by Alibaba. The other five businesses will operate independently. So, how is the analyst community responding to Alibaba’s sudden restructuring?
For now, it looks like Wall Street is largely positive on Alibaba’s transition. For example, Morgan Stanley analysts believe that the restructuring could unlock value in Alibaba shares, which (per CNBC) the firm assesses as “trading at a significant discount to their sum-of-the-parts valuation.”
What’s Happening With BABA Stock?
BABA stock didn’t exactly take a trip to the moon this morning. However, shares did move 2% higher and break above $102 by 10:30 a.m. Eastern. At least for now, it appears that investors approve of Alibaba’s restructuring.
Morgan Stanley analyst Gary Yu is certainly optimistic. He sees “potential for more than 2x upside to our bull case of US$200 per share.”
Other analysts might not be quite as bullish as Yu. Yet, some of them still maintain a sunny outlook for Alibaba. As CNBC reports, Jefferies analysts believe Alibaba’s reorganization will “allow different business units” in the company “to respond quickly to market changes.” Thus, BABA stock trades at a “meaningful discount” to Alibaba’s sum-of-parts valuation.
The Jefferies analysts foresee Alibaba shares gaining 22% to reach $120. Clearly, investors and Wall Street’s experts have high expectations this year as Alibaba undergoes dramatic changes.
On the date of publication, David Moadel 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 InvestorPlace.com Publishing Guidelines.
