Alibaba Group Holding Ltd shares are up on Tuesday morning after MKM partners said that the stock had been oversold in recent weeks and now was a good time to buy in. Rob Sanderson, who wrote the report for MKM, said that his investment thesis for Alibaba had not changed despite the rocky market, and fears of a wider slow down in China.
Mr. Sanderson kept a Buy rating on shares in Alibaba Group Holding Ltd and has a price target of $105 on the shares. At time of writing stock in the firm is selling for $68.76, up 4.4 percent for the morning so far. Shares are close to 27 percent below the closing high of $92.88 set on May 21, a little over three months ago.
Alibaba still has strong consumer interest
The MKM report was based heavily in the research firm’s most recent survey of consumer intentions in China. The results showed that 77 percent of Chinese people had no intention of slowing their spending on goods and services in the short term.
44 percent of those that answered the survey said that they were looking to shift more spending online and away from brick and mortar retailers. As more buyers move online, the survey made it clear where they’ll be going. 67 percent of those that answered said that Alibaba Group Holding Ltd was their favored e-commerce site.
Those numbers look good for Jack Ma’s firm, and Mr. Sanderson says that they support the thesis that he has held to for quite a while. E-commerce is going to boom in China in the months and years ahead, and Alibaba is the firm that will garner most of the sales from that shift.
Tracking a slowing China through Alibaba
If China’s economy stops growing, or the rate of growth begins to slow down, it’s not quite clear what the effect on Alibaba sales will be. Though overall consumer spending will shrink if China enters the economic doldrums, Alibaba may still grow given the shift to spending on the web rather than on the high street.
Mr. Sanderson says that the online shift is stronger in some areas than other. “Chinese consumers show strong interest in emerging online categories like recreation, food, health goods and jewelry,” he wrote in his report on Alibaba.
Doug Anmuth of JPMorgan reckons that Alibaba Group Holding Ltd will thrive despite Chinese weakness goes on. Ina report published on August 21 Mr. Anmuth said that he’s looking for the firm’s shares to hit $96 in the next twelve months.
Mobile will be the key for Alibaba Group Holding going forward, says Anmuth. He reckons the firm may feel some pain in the short term as it builds for mobile growth in the months and years ahead.
Shares in Alibaba are still down by more than 30 percent since the start of the year, and Wall Street, nervous about the hidden risks that China might represent, isn’t jumping behind Mr. Anmuth and Mr. Sanderson with both feet.
Today’s rise in stock price appears based in a booming reaction to yesterday’s movement. Alibaba’s coming weeks will be defined by concrete news from China, not market mood swings.