Could Alibaba Be the First Trillion-Dollar Company?

Global stock markets are awaiting the news of Alibaba’s fourth-quarter earnings, expected Friday, May 4, with some suspense.

The stock has become, especially to Western investors, a bellwether of the broader Chinese economy and of the expanding pace and acceptance of online retailing. Plus, the Chinese e-commerce juggernaut Alibaba is seen as one of the few companies able to challenge U.S. titan Amazon in the retailing space.

So it is news when one of the most famous Negative Nellies on Wall Street, short seller Andrew Left of Citron Investing, who specializes in spotting the stock market’s “lemons” issues a rare buy, as he has on Alibaba. It will exceed expectations on its quarter and guidance and could easily go over $200, he predicted in a report released yesterday.

Alibaba went public in September 2014 at $68 a share and is currently circling $178.

Far from being out on a limb, in this call, Left is largely agreeing with other investment banks, Bank of America Merrill Lynch and Raymond James, among others. Several have a “buy” on the stock, some lauding its travel and online payment divisions in particular as ones to watch.

Left is not promising the stock will zoom Friday, on its earnings announcement. It’s possible Alibaba will show lower operating margins than “the sell side consensus” due to offensive, value-creating investments which “may give investors an opportunity to buy what could be the first trillion-dollar company at a cheap price,” he predicted.

While most commonly referred to as “The Amazon of China,” Alibaba has a differentiated business model from Amazon, noted Left, that is more asset-light and empowers the small business.

Alibaba is “The tollbooth to middle-class consumption in China,” he said.

Categories

E-Commerce