By Senad Karaahmetovic
Shares of Alibaba (HK:9988) (NYSE:BABA) have continued to rally at the beginning of a new trading week, boosted by several positive catalysts.
The confirmation that founder Jack Ma will cede control of the fintech giant has boosted Alibaba stock as investors continue to hope that China will ease its regulatory crackdown. Moreover, the Financial Times reported earlier today that Ant held talks with the UK's Prime Minister Rishi Sunak over a potential initial public offering (IPO) in London.
Alibaba received a further boost on Monday after Goldman Sachs and Morgan Stanley analysts elected the stock to their Top Pick lists.
Goldman analysts highlighted Alibaba as one of the key beneficiaries amid China's faster-than-expected reopening, macro recovery from Q2, and normalizing internet regulations. As a result, the stock is added to Goldman's Conviction List.
"We see Alibaba at 11X 2023 adj. P/E as the best value stock proxy to enjoy advertising recovery, fintech (via. 33%-owned Ant) and cloud structural growth, add to CL as we believe the worst is behind us after two years of downward earnings revisions with the largest room for valuation multiple repair amongst the mega-caps as its top line growth resumes and 2022-25E earnings resume to mid-teens growth," the analysts said in a client note.
Morgan Stanley analysts agree and add that Alibaba stock is "mispriced at ex-growth F24e P/E of 11x."
"We believe inflection in CMR and cloud, plus operating efficiency, will drive a 18% adjusted EBITA CAGR in F2023-26e. Easing regulation, particularly on fintech, is a key catalyst," the analysts wrote in a report on Alibaba.
As a result, Alibaba stock is elevated to a "non-consensus Top Pick" at Morgan Stanley, for the first time in three years.
Alibaba shares are up nearly 5% in pre-market Monday after surging 2.7% on Friday.