Analyst Waxes Optimistic on Alibaba Stock

The Needham analyst in coverage added BABA to his conviction list

Deputy Editor
Jul 9, 2020 at 10:00 AM
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The shares of Alibaba Group Holding Ltd (NYSE:BABA) are up 3.7% at $267.25 at last check, after Needham initiated coverage with a "buy" rating and a price target of $275. The analyst also confidently added the stock to his Conviction List, citing the company's "well-established" ecosystem, its e-commerce strength, and its "deep understanding" of China's retail environment, which will prove as helpful as the company broadens its horizons. 

Today's pop has Alibaba extending yesterday's record high, fresh off an all-time peak of $268, with recent support stemming from the 40-day moving average. Up 52.7% year-to-date, if this price action continued throughout June, BABA will be looking at its fourth straight monthly win. However, it's also worth noting the stock's 14-day Relative Strength Index of 75, which sits in "overbought" territory. This is usually an indicator that a short-term breather could be ahead. 

Coming into today, analysts are unanimously bullish, with all 14 at a "strong buy" rating. However, the stock is barely above its 12-month consensus target price of $260.84 -- a mere 1.2% premium to last night's close, leaving room for a round of price-target hikes. 

Bullish sentiment is echoing just as loudly in the options pits, per BABA's 10-day call/put volume ratio of 3.88 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). This ratio sits in the 98th percentile of its annual range, suggesting that options buyers are rarely more call-heavy. 



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