MKM Partners predicts Alibaba will reach the vaunted trillion-dollar valuation ahead of its internet peers.

"It seems likely to us that we will have multiple $1 trillion valuation companies within the next 1-3 years if the current bull market continues. In this note, we examine the pathways of the six leading contenders: Apple, Google, Amazon, Facebook, Tencent and Alibaba," analyst Rob Sanderson wrote in a note to clients Friday entitled "Pathways to $1 Trillion Valuation and Who Arrives There First."

"An argument can be made for each company achieving $1 trillion in market cap by 2020, with a case for Apple in 2019. We think it's most likely 2021 when the barrier is broken by an Internet company, but think BABA may have the best chance for 2020 despite being the smallest of the mega-caps today."

Sanderson reiterated his buy rating and $220 price target on Alibaba shares, representing 28 percent upside from Thursday's close.

Alibaba has a market value of nearly $440 billion, according to FactSet. Its shares have shot up 96 percent this year, compared with the S&P 500's 20 percent return.

The analyst noted online commerce is growing more than twice the rate in China versus the U.S., while Alibaba's monetization rate is one-sixth to one-eighth of Amazon's.

"We believe that opportunities for further monetization gains are plentiful, largely within the company's control and that ad-loads represent a considerable growth driver that is at the discretion of management," he wrote. "We think that BABA may have the best chance among Internet mega-caps to become the first $1 trillion company."

Sanderson believes Alibaba can reach a $1 trillion market cap by 2020 if it generates earnings-per-share 20 percent above expectations in 2018, grows earnings by 45 percent in 2019 and preserves its 24 times forward price-earnings ratio.

To be sure, the analyst said there were many risks to Alibaba's future including its ability to raise ad load, prospects for its many investments such as Ant Financial, and losses from its Alicloud and other businesses.

