The Bullish Case for Alibaba Shares in New York

Alibaba's virtual investor day mesmerized Wall Street by managements announcement that its cloud business - the high growth engine that changed the destines of Amazon and Microsoft - will be profitable in 2021. There are multiple catalysts for Alibaba shares this autumn:

One, its ownership of Ant financial makes it a natural proxy for the global frenzy for the listing of the world's preeminent fintech on October 15th in Shanghai and Hong Kong. Since Ant will be priced at $240-250b and trade up as high as $300b, its parent Alibaba will get a massive bid from global institutional investors anxious to secure their index weightage in the former Alipay.

Two, Alibaba dominates China's public and private cloud with 30-35% compound annual growth rates (CAGR) in the past 3 years. Alibaba cloud is now a decade old and will finally turn profitable in Fiscal 2021. This is a strategic milestone in the history of China's e-commerce colossus.

Three, Alibaba's logistics business, Cainiao, is also on the precipice of delivering positive cash flow. Another growth ballast for BABA. Yet while China has controlled the pandemic, or at least claims to do so on the Great Firewall of China, the pandemic will also accelerate the digital transformation of industries and provinces in the Middle Kingdom.

There is no doubt that the addressable market for Alibaba Cloud is so vast that it would not surprise me if it would surpass Amazon AWS' 31% operating margin. This would then be a compelling argument for analysts to raise earnings guidance and provide a steroid shot for its shares in New York, possibly as high as $340.

Alibaba has a growth runway that is simply longer than any other e-commerce firm in Asia. Alibaba has also demonstrated that it can execute vast, complex technology and engineering mega projects with scale and finesse.

At its current price of $286 I would begin to accumulate the shares and buy more if the post-election temper tantrum on Wall Street leads to a winter sell-off in global equities. This means my buy/sell range for Alibaba in 2021 is $260 to $340 on the ADR in New York. Me being me, I believe I can design options strategies on the CBOE that would allow me to generate a 100% profit if this range holds. As the Scottish poet Robert Burns warned option traders "the best laid plans of mice and men aft go astray." Yet hope springs eternal in the human soul on the eve of history's biggest fintech IPO.

Matein Khalid is the Chief Investment Officer of Asas Capital Management. He has 25 years of experience in international capital markets as an advisor to family offices and fund managers. He has worked for investment banks/hedge funds in New York, Chicago, London, and Geneva. In addition, he has been the CIO of a technology fund in San Francisco, a royal investment office in Dubai and a public insurance company listed on the DFM.