Alibaba could head to new highs in coming weeks, possibly overtaking records set in late January, says one market watcher.
“We have a very strong two-year upturn on Alibaba,” said TradingAnalysis.com founder Todd Gordon said on CNBC’s “Trading Nation” on Thursday. “We’ve yet to eclipse the high in Alibaba so I take that as a short-term positive. We should be able to move up and break through the recent highs.”
The Chinese e-commerce company has seen a consistent upward swing in the last 12 months and has generally moved higher during the past two years. Its stock has more than doubled since the beginning of 2016.
So far this year, its shares have risen nearly 16 percent, a better run than the rest of the technology industry. The XLK Technology ETF, which does not hold Alibaba, has increased 9 percent for 2018.
But, longer-term gains look more elusive, says Gordon.
“One thing I would caution, though, is Alibaba tends to be a short proxy to get short exposure into China,” he said. “The little bit of push here, I don’t know if it’s sustainable because I do think it is short covering on the news that they might be listed in mainland China, so short-term strength.”
Shares rallied on Thursday in its best one-day performance since mid-February after The Wall Street Journal reported the possibility of a stock listing in China. Alibaba has expressed interest in trading in China if regulations are loosened to allow foreign companies to list.
Alibaba has short interest at 4.8 percent of its float, above the average 3.6 percent on the S&P 500. Such a level puts it within the range of the S&P 500’s top 100 most shorted stocks, though that index does not hold Alibaba shares. One of its closest competitors, Baidu, has short interest at 1.3 percent of its float.
There are some Alibaba bulls, though, including Michael Bapis, partner and managing director at the Bapis Group at HighTower Advisors. The company’s fundamentals give Bapis a reason to feel bullish over the near and long term.
“Their earnings are strong and their growth story is even stronger,” Bapis said on “Trading Nation” on Thursday. “They continue to make money and they continue to expand.”
Alibaba has posted double-digit revenue growth every year since 2013, including a 48 percent rise last year. Analysts expect growth to accelerate this fiscal year — those surveyed by FactSet anticipate a 69 percent year-over-year sales increase.
“It’s obvious the Chinese government wants them to come back to China. Many people in China have lost out on these returns, up close to 90 percent since their IPO,” said Bapis. “We would own the name for the near term and the long term.”
The majority of analysts on Wall Street have a buy rating on Alibaba and an average $229 price target, according to FactSet. That target implies 15 percent upside to Thursday’s close.