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Short Seller Citron Research: Alibaba On Its Way to $250

CapitalWatch Staff 2018-11-19 14:53 PM
Short Seller Citron Research: Alibaba On Its Way to $250

Famous U.S. short seller Citron Research made an unexpected long position announcement about China&`#`39;s e-commerce giant, Alibaba (NYSE: BABA). The latest report calls the company the "most shorted stock in the world" that's "on its way to $250."

Following the report, shares of Alibaba opened up at $183.5 per share before dropping to $175.77 per share later in the day.  

Alibaba is expected to release its earnings and revenue guidance Friday, and Citron believes that the company will "exceed expectations on its quarter and guidance and could easily go over $200 as &`#`39;the setup&`#`39; is in place."  

Citron also mentioned that "Alibaba will show lower operating margins than &`#`39;sell side consensus&`#`39; due to offensive, value creating investments which may give investors an opportunity to buy what could be the first trillion-dollar company at a cheap price."

Exactly how cheap? Citron said compared with Amazon, Alibaba trades at a 40 percent discount. Based on the chart shown below, Alibaba has historically traded in line with Amazon on EV/EBITDA. Yet, now Amazon trades at about a 40 percent premium to Alibaba on 2020 EBITDA. Given Alibaba&`#`39;s growth potential, its stock is very attractive to investors. 


Source: Citron Research 

Moreover, China now wants offshore-listed tech giants to sell CDRs on the mainland, and Jack Ma already said yes. A secondary listing would be a major positive catalyst for Alibaba's ADR stock, said Citron&`#`39;s analyst in the report.