Alibaba sails through regulated seas, but long-term upward outlook expected

Regulatory risk is something that any relevant investor should consider when making decisions, especially when it comes to companies based in China. The government of the world’s most populous country is often involved in the business events of various publicly traded companies. Most notable are the threats against the ride-sharing company Didi Global Inc. (DIDI), causing stock prices to fall dramatically. While these risks are safe for now, they weigh on the Alibaba Group (BABA) also. (To see Alibaba stock charts on TipRanks)

Reporting his hypothesis on the company’s prospects is: Colin Sebastian from Baird Capital, who wrote that while regulatory risks remain looming over BABA, the stock’s low valuation probably has already priced in those concerns.

Sebastian reiterated a buy recommendation for the stock and set a price target of $270. This target suggests a possible 12-month rate of increase of 30.73%.

The five-star analyst added that domestic political tensions and higher operating costs are also challenging the stock. However, initiatives such as investments in physical stores are beneficial for long-term growth, he says.

In addition, Sebastian expects Alibaba to “reinvest virtually all incremental profits in FY22” to stay ahead of the competition and gain market share.

China’s National Bureau of Statistics reported an expected slowdown in retail sales for the past quarter. So Sebastian’s bullishness is less focused on short-term potential.

While he kept an eye on Chinese regulators and their aversion to monopolistic behavior, Sebastian noted that the company is huge and most likely would not receive the same level of threats against Didi. He mentioned that Alibaba generates profits that exceed those of both Amazon (AMZN) and eBay (EBAY) combined and currently ranks as “the world’s largest online e-commerce company.”

On TipRanks, BABA has an analyst consensus of Strong Buy, based on 22 Buy and 2 Hold ratings. The Alibaba’s average price target is $290.82, representing a 12-month upside potential of 40.81%. BABA closed trading Friday at a price of $206.53.

Disclaimer: The opinions expressed in this article are those of the featured analyst only. The content is for informational purposes only. It is very important to do your own analysis before making any investment.