Why Alibaba Stock Pumped Higher Today

Key Points

• An analyst raised his price target on the Chinese tech sector incumbent by 31%.

• He believes its cloud unit will continue to be a star performer.

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Alibaba Group (NYSE: BABA) had a fruitful and bullish Tuesday on the stock exchange, with its U.S.-listed American depositary receipts (ADRs) rising on the back of a meaningful analyst price-target hike. With that, Albaba stock closed that trading session 4% higher, handily beating the 0.3% increase of the S&P 500 index.

A 31% boost

Well before market open that day, Barclays's (NYSE: BCS) Jiong Shao lifted his Alibaba fair value assessment to $190 per ADR. That was significantly higher than his preceding price target of $145. Shao maintained his overweight (read: buy) recommendation on the Chinese tech giant.

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Image source: Getty Images.

According to reports, the basis for Shao's bullish move is Alibaba's mighty cloud computing unit. The prognosticator pointed out that this business alone saw revenue growth of 26% year over year in the company's recently reported second quarter. He firmly believes that figure can go higher, and management will be able to maintain its profit margins.

At first glance, that quarter was a disappointing one for Alibaba, as the company missed the consensus analyst estimates for both revenue and profitability. However, there was much for investors to like, such as the performance of that cloud unit and encouraging growth in e-commerce.

A bunch of price target bumps and an upgrade

Even after that Q2 double miss, analysts are generally bullish on Alibaba's future. Like Shao, a clutch of them raised their price targets on the veteran company after earnings with one analyst (Arete's Zixiao Yang) upgrading their recommendation to buy from the previous neutral, at a price target of $152 per ADR.

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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool recommends Alibaba Group and Barclays Plc. The Motley Fool has a disclosure policy.