Alibaba Aims for 1 Billion Consumers As Stock Hits All-Time Highs

With more than a 50% rally from the lows of March through last week, few on Wall Street are bearish when it                                                                                                         comes to shares of Chinese e-commerce giant, Alibaba (NYSE: BABA). But if there were any who had doubts going into the weekend, they’re sure to be second-guessing themselves now. Reports came through on Saturday of a ultra-bullish shareholder letter from management that outlines their plans and goals over the coming years which are nothing short of astronomical.

By 2025, the company wants to be serving a consumer base of 1 billion people as almost $1.5 trillion in revenue flows through the platform. By the middle of the next decade, they want to be serving 2 billion consumers while having created more than 100 million jobs. Talk about stretch goals.

CEO Daniel Zhang Yong commented in the letter how "globalization is our long-term battle; Chinese domestic consumption is our cornerstone battle and big data powered by cloud computing is our battle for the future." Their most recent annual active customers number came in at 140 million, up 16% from the 120 million it was last year. In the meantime, their revenue is up 35% while net income is up 75%, signs of a company that is doing nothing but building momentum.

Strong Bid

Investors haven’t been slow about latching on to this growth potential and Alibaba shares have been a firm favorite in recent months. Even a 25% dip from the coronavirus pandemic was quickly bought and reversed with shares surpassing their pre-COVID levels to print new all-time highs just last week.

Analysts from the sell-side have been more than happy to get behind the story with the most recent uplift coming last Thursday. Needham initiated coverage with a solid Buy rating, being particularly impressed with Alibaba’s growth potential in "adjacent industries such as offline retail, food delivery, and cloud computing." Even as shares traded hands around the $260 mark last week when as recently as March they were at $170, Needham slapped a $270 price target onto them.

However, considering shares came within $2 of that target before traders logged off for the weekend, it felt surprisingly cautious given the stock was capping off a 20% jump in a single week. Bernstein were a little more bullish when they upped their price target on Alibaba shares last month from $270 to $290 while maintaining their Outperform rating.

Solid Momentum

In many ways, it appears as if the coronavirus has so far been a net positive for the company, as it has for many other e-commerce and online businesses such as Amazon (NASDAQ: AMZN) and Netflix (NASDAQ: NFLX). With more people than ever before locked down in their homes and non-essential businesses shut, online shopping has seen a growth spurt that no one expected. And even as states and countries reopen and economies shift back into gear, many consumers, particularly those new to the ease and simplicity of online shopping, will stick around at least in some capacity.

Oppenheimer saw this shift coming back in May and upped their Q1 revenue and EBITDA estimates. This happened only the week after Alibaba reported their fiscal Q4 earnings that smashed analyst expectations and showed revenue growing 22% year on year. In the same report, the company announced that for the first time ever their gross merchandise value, which is the value of all merchandise sold over a certain time period, had surpassed the $1 trillion mark in a single year.

If they’re able to achieve that kind of growth even as unemployment soars around their most fertile markets, who can say they won’t hit the 1 billion consumer mark within 5 years?