The article was written by Motek Moyen Research Seeking Alpha’s #1 Writer on Long Ideas and #2 in Technology – Senior Analyst at I Know First.

Summary:

Alibaba Group Holding’s stock has already posted a 3-month return of +29.04%. I still reiterate it as a buy.

Digital advertising, cloud computing, Youku, and Lazada are all obvious long-term tailwinds that can notably boost BABA’s price.

My-month PT for BABA is $200. This is reasonable. The average 12-month PT for BABA at TipRanks is $203.33.

Alibaba making Youku the Netflix of China can be a major boost to Alibaba’s subscription revenue business.

The 0% commission rate on Lazada means it will continue to rule Southeast Asia’s booming e-commerce industry.

I still reiterate a buy rating for Alibaba Group Holdings (BABA). This stock has posted excellent 30-day and 90-day return, but I still insist BABA has more upside potential. BABA’s 30-day return of +14.27%, and the 30-day return of +29.04% are strong indicators that large investors and hedge fund managers are again in love with it. This increasingly-positive emotion over Alibaba’s long-term growth is a strong buy signal that all big and small investors should exploit immediately.

(Source: BarChart)

Alibaba has a strong balance sheet and very strong revenue/net income growth rate. Ignore Trump’s cold trade war posturing with China. Alibaba’s growth momentum is unaffected by political tensions between China and the United States. The revenue/net income chart below that Alibaba’s quarterly numbers are still growing in spite of Trump’s trade war quarrel with China’s communist leaders.

(Source: BarChart)

Alibaba’s Growth Momentum Will Only Get Stronger

Alibaba has a big lead in Business-to-Business (B2B) e-commerce over Amazon (AMZN). The pseudo-monopoly of Alibaba of the global B2B business is why it touts a far higher gross merchandise value (GMV) when it comes to e-commerce sales. The $768 billion TTM GMV of Alibaba is a tall uphill challenge for Amazon. This amount is more than double the $239 billion TTM GMV of Amazon.

The chart below should convince investors that they ought to keep increasing their position on Alibaba.

(Source: The Motley Fool)

The growing B2B e-commerce industry, dominated by Alibaba, is expected to have a market size of $6.7 trillion by next year. This can double up by 2028. If you think Alibaba’s $768 billion TTM GMV is already impressive, wait three years from now. My fearless forecast is that BABA’s TTM GMV will likely hit $1.1 trillion by 2022.

Alibaba Is Also A Leader In Digital Ads

Alibaba has also a big lead on Amazon when it comes to global digital ad revenue. As per the estimates of eMarketer analytics, Alibaba’s share of this year’s global ad spending will reach $30.5 billion. This is again more than double that of Amazon’s estimated 2019 ad revenue of $9.1 billion.

(Source: eMarketer)

The growing advertising business of Alibaba is thanks to its more than 500 million mobile shopping customers. Even Lazada’s mobile apps in Southeast Asia is ad-spammed with sponsored ads placed by third-party vendors. Selling sponsored ads helps Alibaba monetize from Lazada, TaoBao, and Tmall. Ads on Lazada is a necessity because since June 2018, Lazada offers 0% commission on sales and shipping fees. Aside from sponsored ads, Alibaba only makes money from Lazada’s 2% payment fee when it remits the sales to its third-party vendors.

Speaking of Lazada, I am bullish on its future. It will remain the king of Southeast Asia’s e-commerce industry. It pleases me that Lazada is getting away hosting third-party vendors that sells pirated software products, copycat branded goods, and original/copycat sex toys. The more products that Lazada sells, the faster it can grow its total addressable market.

Like it is in Alibaba’s China TaoBao and Tmall, counterfeit physical and soft products are sold by third-party vendors. Microsoft (MSFT) is not complaining because in the long-term, counterfeit Windows and Microsoft Office helps increase their monthly active users. Five or ten years from now, Windows operating systems will fully go Software-as-a-Service.

I do not think Alibaba can take pole position in the e-commerce industries of North America, Europe, or India. Alibaba’s core e-commerce can only rely on Southeast Asia as its next growth area outside of China. Maybe if Alibaba spends tens of billions of dollars more, it can also dominate Africa and Latin America’s growing online retail industry too.

Alibaba spent $4 billion to acquire full control of Lazada. I think it should also spend $4 billion to takeover Africa’s leading e-commerce companies. Buying more online retailers also increases the total number of potential advertising eyeballs.

Final Thoughts

The other strong and growing tailwind is Alibaba Cloud. You should add more BABA shares if you like Amazon’s AWS and Azure from Microsoft. Alibaba Cloud is now a major contributor to the Services segment. Services is now a $4 billion/quarter tailwind for Alibaba.

It is my fearless forecast that Alibaba Cloud will outpace the growth of Alphabet’s (GOOGL) Google Cloud business. Synergy Research still puts Google Cloud as the no.3 public cloud global leader. However, China and Asia’s emergence as the next growth area for cloud computing infrastructure services is greatly in favor of Alibaba Cloud. I do not think China’s communist government will allow Google Cloud to enter the Chinese market.

My very bullish sentiment for BABA is also due to its decent buy signal from the one-year market trend forecast of I Know First. The one year forecast trend score of BABA is 86.23 – almost near 100 which is a clear bullish signal. More importantly, I Know First’s 12-month predictability score for BABA is 0.75. It means I Know First’s AI stock-picking algorithm has a great history of correctly predicting the 12-month trend pattern of Alibaba’s stock.

Past I Know First Success with Alibaba Stock Forecast

I Know First has had bullish Alibaba Stock Forecast November 15, 2018. The AI algorithm issued a bullish 1 year stock forecast with a signal of 233.23 and a predictability of 0.77, the algorithm successfully forecasted the movement of the BABA share. See chart below:

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Please note-for trading decisions use the most recent forecast.