Alibaba stock is a good investment
Alibaba share forecast 2021: is the Chinese e-commerce giant's stock a buy recommendation?
Shares in China's online trading platform Alibaba (BABA) hit an all-time high of $ 319.32 in October, but have since fallen 28.5 percent through 2021 on concerns about regulation in China and the United States.
Is it a good opportunity to add the stock to your investment portfolio? How will the price develop in the future?
In this article, we take a look at the main drivers behind the share price as well as the analysts' Alibaba stock forecast.
The Chinese E-Commerce Industry Today: The trend towards online sales is clear
As a result of the shift in consumption to e-commerce both in China and around the world, stocks in Chinese online retailers rallied during the COVID-19 lockdown last year. Market research firm eMarketer predicts that in 2021, China will be the first country in the world where more than half of all retail sales are handled via e-commerce, after the share rose from 44.8 percent to 52.1 percent last year is.
Ecommerce sales in China are set to exceed US sales at nearly $ 2 trillion in 2021. In 2022, sales are expected to rise 11 percent to more than $ 3 trillion, which corresponds to 55.6 percent of retail sales. The country with the second highest e-commerce rate is South Korea, where online sales are expected to account for 28.9 percent of sales in 2021.
Alibaba will hold 50.8 percent of the Chinese e-commerce market this year, JD.com (JD) will hold 15.9 percent and Pinduoduo (PDD) will hold 13.2 percent.
Although sales are expected to surge this year, share prices have come under pressure after Chinese retailers were threatened with delisting from US exchanges and the Chinese government tightened their control. The Hang Seng TECH Index, which comprises the 30 largest technology companies listed on the Hong Kong Stock Exchange, has risen just 0.38 percent since the start of the year, compared with a return of 80.75 percent in the previous year.
Alibaba stock rose from $ 215.47 in early 2020 to an all-time high of $ 319 before slipping back to $ 232.73 and ending the year with an 8 percent gain. The share price rose to $ 270.83 in February but then fell to around $ 222. On April 15, the stock closed the trading day at $ 239.23.
Alibaba Stock News: Regulatory Challenges
Antitrust authorities in China began investigating Alibaba in December, investigating its holdings in social media and entertainment platforms, as well as in retail, wholesale and cloud computing businesses and fintech company Ant Group.
Regulators asked Ant Group in November to withdraw its IPO on the Shanghai and Hong Kong stock exchanges amid concerns about the impact of the microfinance market on the Chinese financial system.
Alibaba faces government fines for anti-competitive behavior exceeding $ 975 million. In the US, investors were concerned that the company could be removed from the New York Stock Exchange after three Chinese telecommunications companies were banned from US stock exchanges last year for their ties to the Chinese government.
In March, the US Securities and Exchange Commission passed the Trump administration's Holding Foreign Companies Accountable Act, which requires foreign companies to give regulators access to their financial audits.
However, some analysts believe the potential disruption to markets caused by the delisting of companies the size of Alibaba and Tencent (0700) could prove daunting. The decline in share prices could offer a buying opportunity given the Group's diverse portfolio and strong financial outlook.
In the 12 months ended December 31, 2020, Alibaba had 779 million active customers using its Chinese retail marketplaces, an increase of 22 million over the same period ended September 30, 2020.
In the fourth quarter, despite new waves of the COVID-19 pandemic due to accelerated digitization in all industries in Southeast Asia, Alibaba's Southeast Asian e-commerce platform Lazada recorded a three-digit growth in orders compared to the previous year.
AliExpress, the company's online shopping platform, continues to invest in global infrastructure in partnership with its logistics business, Cainiao - a move that has fueled a sustained recovery since the pandemic began.
Alibaba's cloud computing business posted positive adjusted earnings before interest, taxes, depreciation and amortization (EBITA) for the first time as it realized economies of scale. Revenue rose 50 percent year over year to 16.12 billion yuan ($ 2.47 billion).
Maggie Wu, Chief Financial Officer of Alibaba Group, said, "We had another solid quarter, with revenue growing 37 percent year over year and adjusted EBITDA of 22 percent year over year, thanks to our strong free cash flow to continue investing in strategic areas. "
"We are excited that our Alibaba Cloud business posted positive Adjusted EBITA for the quarter and Cainiao Network posted positive cash flow from operations. These advances reflect our long-term approach to organically growing and growing businesses from start to finish."
What is the Alibaba share forecast for the rest of the year?
Alibaba share forecast for 2021: what's next?
According to MarketBeat, the average Alibaba share forecast of the 32 surveyed analysts is $ 322.48, a potential price increase of 34.7 percent over the current share price. Two analysts currently give the stock a "hold" rating, 29 stock market experts recommend buying the stock, and one of them says Alibaba is a "strong buy".
On April 1, analysts at the Australian bank Macquarie again rated the stock as "Outperformer", but the price target was lowered to $ 407 per share from $ 421 previously. In their Alibaba stock analysis, they also revised their earnings estimates for Alibaba in 2021 down to reflect a higher investment in the online grocery market, but noted that "the stock has a good risk-return ratio."
WalletInvestor has a bullish Alibaba stock forecast for 2021 and beyond. The price is expected to rise from $ 239.30 to $ 301.73 in one year. In the long-term perspective, its stock price can reach $ 536,760 in 2026.
Will Alibaba stock rise in 2021?
Some analysts see the potential for the share price to rise this year, while others believe the security will change insignificantly in value.
Is Alibaba stock a good investment option?
If you expect the price of BABA stock to rise in the future, you can consider the stock as either a short-term or a long-term investment.
Is the BABA share a good long-term investment?
Whether you should opt for a long-term investment in Alibaba depends on your assessment of the future development of the company as well as the composition of your investment portfolio and your risk tolerance.
How to Trade CFDs on Alibaba Stocks?
If you want to speculate on the price movement of the stock, you can trade Contracts for Differences (CFDs) on BABA at Capital.com.
CFDs are financial instruments that allow you to take advantage of the direction of a stock price without having to buy the underlying stocks.
If you expect the price of the BABA share to rise, you can open a long position. If you think it is going to fall, you can go short and still make a profit.
Alibaba Group Holding Limited - Trade BABA CFD
Note, however, that CFDs are a leveraged instrument. With their help, you can open a larger position with a smaller starting capital. However, if the share price moves against your position, not only profits, but also the risk of loss increase. If you are new to CFD trading, we encourage you to read through our comprehensive trading study materials.
Once you're ready, open a trading account at Capital.com and stay up to date with the latest Alibaba stock news. What's your Alibaba stock forecast?
How much could you have made had you got on board today? Find out here!
Read More: Amazon Share Forecast: Everything Points to More Growth in 2021
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