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?
At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 39.7% gains over the past 12 months and outperformed the 24.1% gain enjoyed by the S&P 500 ETFs. Our enhanced small-cap hedge fund strategy returned more than 45% over the last 12 months and outperformed SPY by more than 30 percentage points over the last 4.5 years (see details here).
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‘.