MKM’s partners expect Alibaba to reach an estimated $1 trillion compared to its competitors on the Internet.
“It is likely that we will have $1 billion worth of valuation companies over the next one to three years if the current bull market continues. In this note, we look at the routes of the six major competitors: Apple, Google, Amazon, Facebook, Tencent, and Alibaba.” Analyst Rob Sanderson wrote in a Friday announcement to the customer titled “Paths to $1-Billion”.
“It’s fair to say that each company will reach a market cap of $1 trillion by 2020, Apple’s in 2019. We believe that 2021 is more likely to break the barrier of an Internet business, but believes that BABA can have the best chances for 2020, even though today they are the smallest mega-capital. ”
Sanderson reiterated his bid and target price of $ 220 in Alibaba shares, up 28% from its closing price on Thursday.
Alibaba has a market value of nearly $ 440 billion, according to FactSet. Its shares climbed 96% this year versus S&P 500’s 20% return.
The analyst pointed out that online trade in China is growing at more than twice the rate of the United States. While Alibaba’s monetization rate is 1/6 (one-sixth) to 1/8 (one-eighth) of the Amazon.
“We believe the opportunities for higher monetization gains are many that are largely under the company’s control and that advertising costs are a significant growth driver at the discretion of the administration. We believe Baba has the best chance of becoming the first $ 1 billion company among the Internet’s megaphone titles.” he writes.
Sanderson estimates that Alibaba can reach a $ 1 trillion market limit by 2020 if it generates 20% more earnings per share than expected in 2018, increases profits by 45% in 2019 and / 24 times more benefits.
Undoubtedly, the analyst said there were many risks to Alibaba’s future, including its ability to increase advertising exposure, the prospects for its many investments, such as Ant Financial, and the losses of Alicloud and other companies.