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Pro Analysis

Alibaba to rally 25 percent-plus on surging cloud business, analyst says

Alibaba
Chance Chan | Reuters
Alibaba

Pacific Crest initiated coverage of Alibaba with an overweight rating, saying investors are underestimating the potential of the company's AliCloud cloud computing business.

"AliCloud could be a significant growth and profit driver given Alibaba's lead in the nascent and fast-growing cloud computing market," analyst Hans Chung wrote in a note to clients Wednesday. "We see strong operating leverage potential ahead given AliCloud's increasing economies of scale, while AliCloud's operating margin outlook seems to be underestimated by the Street."