Alibaba shares: what’s the outlook following Jack Ma’s departure?
With the Alibaba share price up over 20% since January and with its legendary founder Jack Ma stepping down in early September, we take a look at where the ‘Amazon of China’ could head next.
A set of new beginnings
It was on Jack Ma’s 55th birthday that the larger than life founder stepped down from his role as Executive Chairman of Alibaba.
A plan long in the making, with the celebration that adjoined this departure being aptly grandiose: a four hour long party with around 60,000 guest in attendance at his home town of Hangzhou.
Ma after all, had built his multi-billion dollar empire from nothing and now boasts the title of China’s richest man.
At the event Ma was quoted as saying:
‘After tonight I will start a new life. I do believe the world is good, there are so many opportunities, and I love excitement so much, which is why I will retire early.’
Education is one possible opportunity that Ma is interested in pursuing.
In Ma's place Daniel Zhang has taken the reins of the $400 billion plus Alibaba. Mr Zhang is currently serving as Alibaba's CEO and Executive Chairman.
Alibaba share price in focus
The market has seemingly responded well to Alibaba’s well-thought-out succession plans: with the Alibaba (BABA) share price rising over 20% since the beginning of 2019 and taking the e-commerce giant’s market capitalisation to a staggering $435 billion.
A glance at Alibaba’s latest quarterly results (ending June 30) goes a long way to explain this bullish YTD run-up.
On the top-line, the e-commerce giant reported revenue figures of $16,741 million, a significant 42% increase on a year-over-year basis.
Yet maybe it was the user growth and engagement figures that proved the most impressive. Here the company reported that:
‘Annual active consumers on our China retail marketplaces reached 674 million, an increase of 20 million from the 12-month period ended March 31, 2019.’
In addition to that it was revealed that:
‘Mobile MAUs on our China retail marketplaces reached 755 million in June 2019, an increase of 34 million over March 2019.’
On the bottom-line, non-GAAP net income also got a boost, rising 54% on a year-over-year basis, hitting $4,508 million.
The company also saw strong growth in its cloud computing business, with revenue rising 66% to $1,134 million during the June quarter. This, as the company pointed out, was driven by higher average revenue per user figures.
Ultimately, the company noted that during the June 2019 quarter, it ‘launched over 300 new products and features, including those related to core cloud offerings, security, data intelligence and AI applications.’
Though Alibaba often earns the title of the ‘Amazon of China’, Business Insider noted that in 2018 the e-commerce giant reported sales triple that of Amazon’s.
Maybe the more apt epithet for Amazon is the ‘Alibaba of America.’
The outlook for Alibaba: analysts weigh in
With strong financials, a monolithic size, and a clear strategy in a post-Jack Ma world, analysts have taken a decisively optimistic outlook on the company’s share price prospects.
According to the Wall Street Journal, the average analyst consensus for Alibaba (BABA) is a buy. Making up that rating, an overwhelming 47 analysts rate the stock a buy, five rate it overweight and one rates it a hold.
Not a single analyst has a sell recommendation on the stock.
According to Bloomberg Data, the financial services firm Raymond James has a ‘strong buy’ recommendation and a significant share price target of $280 per share on the stock.
The lowest analyst price target, according to Bloomberg Data comes from ABC International, who rate the stock a buy, but have a lower price target of $183 per share on Alibaba.
At today’s current share price of $167.23, this outlook, according to analysts at least, looks to be suggestively bright.
This information has been prepared by IG, a trading name of IG Markets Ltd and IG Markets South Africa Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
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