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Alibaba Group Holding Ltd (BABA) Has 15% Upside Potential: UBS AG (UBS)

Rex Crum gave Alibaba Group Holding Ltd (NYSE:BABA) a new nick name in his article on MarketWatch, in light of the recent upgrade that the e-commerce giant received from UBS AG (NYSE:UBS)‘s analyst Erica Werkun, ‘Ali “buy” ba’. A $100 price target has been set by Werkun.

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The stock market seems to have taken the news pretty well, at least as far as Alibaba Group Holding Ltd (NYSE:BABA) is concerned. After a significant dip like most other stocks on the U.S Stock Exchange today, Alibaba is up 1.06% and is trading at $85.84 now. It’s hard to be optimistic in such a volatile market but Werkun have found her reasons.

UBS AG (NYSE:UBS)’s analyst was quoted to have cited two main attributes of Alibaba Group Holding Ltd (NYSE:BABA) that make it such an attractive investment. Firstly, the growth opportunities that Alibaba has aas it plans to expand outside China and secondly, the diversity of Alibaba Group Holding Ltd (NYSE:BABA)’s businesses which include e-commerce, cloud computing and even digital payments.

Moreover, UBS AG (NYSE:UBS)’s analyst also mentioned the the upcoming earnings results of Alibaba Group Holding Ltd (NYSE:BABA) is the near term catalyst for the e-commerce giant.

However, there are certain aspects of Alibaba Group Holding Ltd (NYSE:BABA) that UBS AG (NYSE:UBS)’s analyst seems to be oblivious about. First, Alibaba’s main edge is that it operates in China. If and when the company decides to cross borders, it will face fierce competition from other e-commerce giants such as, Inc. (NASDAQ:AMZN). Jeff Bezos, Amazon’s CEO has a reputation of putting people out of business who do not see eye to eye with him. Hence, Alibaba Group Holding Ltd (NYSE:BABA)’s expansion task is much harder than Werkun thinks it is.

Secondly, Alibaba is still in its infancy days at NYSE. Nobody can tell for certain how Werkun’s e-commerce baby will look like when it comes out of the volatility storm that is raging in the stock markets nowadays. Stocks like Alibaba Group Holding Ltd (NYSE:BABA) seem to be standing tall on the hype that they have built on. With investor sentiment changing, there are going to be a lot more short positions than the more optimistic long ones.

Disclosure: none

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