A Wall Street analyst sees 19% upside in Ariba stock

Solutions for a Big Chinese Tech CompanyAlibaba Group (NYSE: BABA)Recent performance in the US stock market has been less than satisfactory. The company's stock price has significantly underperformed market indices and continues to suffer from a lack of interest in Chinese products.

Morgan StanleyOne of the company's experts believes that this provides an opportunity to buy the company's stock at a discounted price. Although he's not entirely bullish on the company, he thinks its stock price could rise by nearly 19% over the next 12 months or so.

The Stock Marketeer's Feast

Investment banker Gary Yu, the analyst behind the recommendation/target price set, reiterated an equal-weight (read: hold) rating on shares of Alibaba, as well as a price target of $85 per American Depositary Share (ADS), in a new research report in early April. The latter is nearly 19% above the Asian tech giant's most recent ADS closing price.

The reason for this update is the latest news about the company's share buyback. It was revealed that the company purchased 524 million shares of common stock in the first quarter of 2024. The company spent $4.8 billion to do so. In the note, Yu wrote that this was a "meaningful" increase over Alibaba's recent quarterly average share purchase expenditures, which averaged $2.6 billion.

He added that "the last 12 months of the round ($12.5 billion) plus the dividend ($2.5 billion in FY2023) implies a yield of 8% on the company's stock".

A difficult past, an uncertain future.

However, is this a good enough reason to buy the company's stock?

Alibaba has had a difficult few years, with the Chinese pandemic dragging on and the Chinese government making it clear that it wants to curb the company's power and influence. At the same time, management plans to split the company into six separate business units (which has yet to materialize), making Alibaba's future very uncertain.

Although Yu Minhong thinks that Alibaba Group's stock price will be upgraded, in my opinion, this stock is not enough for people to buy.

Should you invest $1,000 in Alibaba now?

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Eric Volkman does not own any of the above stocks. the Motley Fool recommends Alibaba Group. the Motley Fool has a disclosure policy.

A Wall Street Analyst Sees 19% Upside in Alibaba Stock was originally published by The Motley Fool.