Why Citibank, HSBC analysts raised Alibaba price targets

Analysts see a 26% upside on Alibaba Group’s stock, following better-than-expected December 2020 earnings and an oversubscribed US bond sale.

  • Alibaba Group’s (HKG: 9988) shares are down over 2% this week
  • Last week, share price jumped up 6% after the group posted better-than-predicted quarterly sales
  • In terms of outlook, its US stock (NYSE: BABA) has an average 12-month price target of US$323, equating to an upside of over 26%
  • Trade Alibaba, long or short, with an IG account today

Alibaba share price: What’s the latest?

Alibaba Group Holding’s share price is down over 2.2% this week.

Last week, shares rallied over 6% after the company posted better-than-predicted quarterly revenue and announced the pricing of US$5 billion worth of US dollar bonds.

Stocks fell 0.3% on Tuesday (09 February 2021), closing at HK$255.40 a share.

In terms of price targets and consensus ratings, BABA currently has an average 12-month target of US$323 (representing an upside of over 26%) and rating of ‘buy’, according to the latest data published by MarketBeat.

On 03 February 2021 - a day after the company posted its earnings, Citigroup analysts raised their price estimate to US$345 from US$316 on a ‘buy’ call; Mizuho increased target to US$285 from US$270 also with a ‘buy’ rating; while HSBC also boosted their ‘buy’ recommendation on a higher prediction of US$330.

US bond sale attracted US$38 billion worth of orders

The e-commerce conglomerate officially proposed to offer US dollar-denominated senior unsecured notes, including notes being issued under its sustainable finance framework, in an underwritten public offering registered with the United States Securities and Exchange Commission on Wednesday (03 February).

Following that, the group then priced the notes at the following rates:

● US$1,500,000,000 2.125% notes due 2031 at an issue price per note of 99.839%

● US$1,000,000,000 2.700% notes due 2041 at an issue price per note of 99.265%

● US$1,500,000,000 3.150% notes due 2051 at an issue price per note of 99.981%

● US$1,000,000,000 3.250% notes due 2061 at an issue price per note of 99.978%

The offering, which is expected to close on 09 February 2021, has reportedly attracted US$38 billion worth of orders from a large number of top fixed-income investors.

Alibaba says it intends to use the net proceeds of the sale of the non-sustainability notes for general corporate purposes, including working capital needs, repayment of offshore debt and potential acquisitions of or investments in complementary businesses.

Alibaba Cloud posts positive EBIT for first time

The internet company also reported its December 2020 quarter earnings last Tuesday (02 February).

Revenue increased 37% year-on-year to 221.084 billion yuan (US$33.883 billion), beating analyst estimates.

Annual active consumers on its China retail marketplaces reached 779 million for the twelve months period ended 31 December 2020, an increase of 22 million from the twelve months period ended 30 September 2020.

Mobile monthly active users for China retail marketplaces, meanwhile, came in at 902 million in December 2020, an increase of 21 million over September 2020.

The company also reported an adjusted EBITA (earnings before interest, taxes, and amortization) - a measure of profitability - of 24 million yuan (US$3 million) for its cloud business in the December quarter. This is compared to a loss of 356 million yuan in the same period in 2019.

Alibaba said this is the first quarter that the cloud computing arm has achieved positive adjusted EBITA.

How to trade Alibaba shares with IG

Are you feeling bullish or bearish on Alibaba’s stocks?

Either way you can buy (long) or sell (short) the asset using derivatives like CFDs offered on IG's industry-leading trading platform in a few easy steps:

  1. Create a live or demo IG Trading Account, or log in to your existing account
  2. Enter <Alibaba Group Holding> in the search bar and select the instrument
  3. Choose your position size
  4. Click on ‘buy’ or ‘sell’ in the deal ticket
  5. Confirm the trade

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