Tech stock Alibaba is up 90% in the last year and has more room to run: Trader

Alibaba could head to new highs in coming weeks, possibly overtaking records set in late January, says one market watcher.

"We have a very strong two-year upturn on Alibaba," said TradingAnalysis.com founder Todd Gordon said on CNBC's "Trading Nation" on Thursday. "We've yet to eclipse the high in Alibaba so I take that as a short-term positive. We should be able to move up and break through the recent highs."

The Chinese e-commerce company has seen a consistent upward swing in the last 12 months and has generally moved higher during the past two years. Its stock has more than doubled since the beginning of 2016.

So far this year, its shares have risen nearly 16 percent, a better run than the rest of the technology industry. The XLK Technology ETF, which does not hold Alibaba, has increased 9 percent for 2018.

But, longer-term gains look more elusive, says Gordon.

"One thing I would caution, though, is Alibaba tends to be a short proxy to get short exposure into China," he said. "The little bit of push here, I don't know if it's sustainable because I do think it is short covering on the news that they might be listed in mainland China, so short-term strength."

Shares rallied on Thursday in its best one-day performance since mid-February after The Wall Street Journal reported the possibility of a stock listing in China. Alibaba has expressed interest in trading in China if regulations are loosened to allow foreign companies to list.

Alibaba has short interest at 4.8 percent of its float, above the average 3.6 percent on the S&P 500. Such a level puts it within the range of the S&P 500's top 100 most shorted stocks, though that index does not hold Alibaba shares. One of its closest competitors, Baidu, has short interest at 1.3 percent of its float.

There are some Alibaba bulls, though, including Michael Bapis, partner and managing director at the Bapis Group at HighTower Advisors. The company's fundamentals give Bapis a reason to feel bullish over the near and long term.

"Their earnings are strong and their growth story is even stronger," Bapis said on "Trading Nation" on Thursday. "They continue to make money and they continue to expand."

Alibaba has posted double-digit revenue growth every year since 2013, including a 48 percent rise last year. Analysts expect growth to accelerate this fiscal year — those surveyed by FactSet anticipate a 69 percent year-over-year sales increase.

"It's obvious the Chinese government wants them to come back to China. Many people in China have lost out on these returns, up close to 90 percent since their IPO," said Bapis. "We would own the name for the near term and the long term."

The majority of analysts on Wall Street have a buy rating on Alibaba and an average $229 price target, according to FactSet. That target implies 15 percent upside to Thursday's close.

Videos

Trades to Watch

Trader Bios

About

Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's “Closing Bell (M-F, 3PM-5PM ET).   In addition, he contributes to CNBCand CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

Follow Michael Santoli on Twitter @michaelsantoli

Read more

Connect