Here’s Why Alibaba Group Holding Ltd (BABA) is Trending Today

Alibaba Group Holding Ltd (NYSE:BABA) is trending today after analyst Rob Sanderson of MKM estimated that Alibaba’s cloud business has a $20 billion opportunity in five years, with an incremental two to three billion more in other Asian nations. If true, that means Alibaba’s cloud business has a lot of growth ahead. Currently, analysts estimate that Alibaba’s cloud business is at around a $1 billion a year run-rate, and that the unit is growing at a triple-digit percentage rate of around 115% year-over-year.

If Alibaba’s cloud business keeps the growth up and the unit’s margins remain strong, the segment could potentially power Alibaba’s stock higher just as Amazon Web Services has powered Amazon shares over the past five years. Currently, Amazon’s cloud business is at a $14 billion run-rate per year and growing around 47% year-over-year. Not surprisingly, analyst Rob Sanderson has a ‘Buy’ rating and a $130 target price.

What Does The Smart Money Sentiment Say?

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Of the 742 elite funds we track, 86 funds owned $5.9 billion of Alibaba Group Holding Ltd (NYSE:BABA) and accounted for 2.70% of the float on December 31, versus 104 funds and $8.27 billion respectively on September 30. In terms of individual activity, Stephen Mandel‘s Lone Pine Capital raised its stake by 48% to 7.62 million shares while Philippe Laffont‘s Coatue Management increased its holdings by 52% to 4.25 million shares.

The Bottom Line

Alibaba Group Holding Ltd (NYSE:BABA) is in the spotlight due to MKM’s rather bullish cloud estimate for Alibaba. For more reading, check out ‘11 Most Profitable Companies in China‘.

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