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Why Alibaba Stock Popped Again Today

By Rich Smith – Jan 11, 2022 at 1:35PM

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Yet again, an analyst cuts its price target but promises big gains anyway.

What happened

Shares of Alibaba Group Holding (BABA 0.82%) had jumped 2.5% as of 12:30 p.m. ET today. There's going to come a point in time when Wall Street starts to sound like a broken record when talking about Alibaba.

And that time just might be today. Because once again, investors in the Chinese e-commerce giant are being treated to the mixed signals of a Wall Street bank cutting its price target for Alibaba -- and at the same time promising monster profits to anyone who buys the stock.

Stock up glowing green arrow climbs on a stock screen.

Image source: Getty Images.

So what

Last week alone, first Benchmark Capital cut its target on Alibaba stock to $235 per share. But with the stock trading for $127 at the time, that actually worked out to a prediction that it would nearly double.

One day later, J.P. Morgan cut its price target on Alibaba to $180 per share, nonetheless predicting that the stock would end the year up 37%.

Also last week, Charlie Munger -- Warren Buffett's partner at Berkshire Hathaway -- doubled his own investment in Alibaba stock. With the shares flying high lately, I suspect that might have something to do with it.

Now what

And now, Citigroup has just joined the Alibaba party.

In a note covered by this morning, Citi argues that Alibaba stock is worth $216 a share. Once again, that's down from the bank's previous price target of $234. Once again, though, it's way, way more than the $131 or so that Alibaba stock costs today.

In support of its astounding claim that Alibaba will gain more than $100, Citi acknowledges the stock's problems. Regardless, it argues that the challenging macroeconomic environment Alibaba faces, softening consumer spending in China, and the lackluster spending on the recent Singles Day shopping holiday in particular don't change the fact that the stock -- at 17.5 times earnings -- looks very cheap.

And the more that bankers keep joining the chorus on that view, the higher Alibaba stock is going to go.

Citigroup is an advertising partner of The Ascent, a Motley Fool company. JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Rich Smith has no position in any of the stocks mentioned. The Motley Fool owns and recommends Berkshire Hathaway (B shares). The Motley Fool recommends the following options: long January 2023 $200 calls on Berkshire Hathaway (B shares), short January 2023 $200 puts on Berkshire Hathaway (B shares), and short January 2023 $265 calls on Berkshire Hathaway (B shares). The Motley Fool has a disclosure policy.

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