Buy Alibaba stock for a 50% return over the next twelve months: Loop Capital

Rob Sanderon - a Loop Capital analyst recommends loading up on shares of Alibaba Group Holding (NYSE: BABA) Ltd now that they’ve lost close to 20% since mid-May. 

Alibaba stock has been under pressure lately as investors remain cautious on Chinese internet companies primarily due to regulatory headwinds. 

But that will likely change moving forward, said Sanderon in his recent note to clients. 

Alibaba stock could climb back to $115

Rob Sanderon continues to rate BABA shares at “buy”. He sees upside in the tech giant to $115 that signals potential for about a 55% gain from here. 

The Loop Capital analyst is convinced that Alibaba Group is due a turnaround on the back of evolving market dynamics. 

Alibaba stock does also pay a dividend yield of 2.65% at writing which makes up for another good reason to have it in your investment portfolio. 

BABA shares are currently undervalued

Rob Sanderson sees Alibaba shares as super attractive at 5.2 times forward EPS and expects a bunch of factors to contribute to revaluation of the tech stock moving forward. 

These include a pick up in revenue growth attributed to its cloud business. Improved monetisation and market share stabilisation may translate to a higher stock price for BABA as well, he added. 

The Loop Capital analyst, therefore, revised its estimates for Alibaba Group in a recent research note. 

Earlier this week, Fiduciary Alliance announced to have increased its stake in Alibaba stock by a whopping 154% in the first quarter. The institutional buyer now owns a total of over 55,000 shares of the Chinese internet stock. 

AI could be a catalyst for Alibaba shares

What’s also worth mentioning is that Alibaba continued to repurchase its stock amidst the recent sell-off which signals management’s confidence in what the future holds for the New York listed firm. 

In fact, BABA bought back $5.8 billion worth of its shares in the second quarter of 2024 - double the $2.9 billion it spent on stock repurchase in the final quarter of 2023. The Chinese giant still had $26.1 billion left under current authorisation as of June 30. 

In related news, Alibaba Group has recently raised about $5.0 billion via a private offering of convertible notes. It launched Alibaba Guaranteed for the small and medium-sized enterprises last month as well. 

Alibaba stock may be worth owning also because it saw robust growth in its AI revenue in the March quarter as well as its full financial year 2024.