Alibaba Stock Forecast 2016: The Alibaba stock price is down 21.01% after its first full year of trading in 2015.
BABA shares peaked in 2015 at $105.03 on Jan. 8 and closed as low as $57.39 in September. But in the past three months, BABA stock has rebounded 43%.
There are three main reasons why the Alibaba stock price has been able to recover.
And our 2016 Alibaba stock forecast shows that these three factors will push the BABA stock price higher in 2016...
Bullish Alibaba Stock Forecast 2016, Reason No. 1: Video Acquisitions
The first reason we're bullish on Alibaba Group Holding Ltd. (NYSE: BABA) in 2016 is its recent string of acquisitions in the Chinese video market.
On Dec. 16, Alibaba reached an agreement with Walt Disney Co. (NYSE: DIS) to form a subscription service called DisneyLife. The subscription service will include access to Disney and Pixar movies, games, animated series, songs, and Disney resort information.
The one-year subscription service will cost $125.
Alibaba also increased its holdings in the Chinese video market on Dec. 15 by placing a group bid with Tencent Holdings Ltd. (OCTMKTS: TCTZF) for Chinese film Bona Film Group Ltd. (Nasdaq ADR: BONA).
Bona Film has a market valuation of $781 million and was a backer for "The Martian," according to The Wall Street Journal.
But Alibaba made its most aggressive move in November. Alibaba bought Chinese video site Youku Tudou Inc. (NYSE ADR: YOKU) for $3.6 billion. Youku has 580 million members and is known as the "Chinese YouTube."
The purchase of Youku allows Alibaba to promote its online retail site, services, and storefronts. Alibaba is now able to use Youku's well-known Chinese video bloggers to promote Alibaba's goods and services to their built-in audience.
Just from the June quarter this year, Youku reported $28.1 million in revenue from its paid video service, according to The Journal.
All of this means that Alibaba will receive billions of dollars in new revenue. According to iResearch, China's online video market grew 80% in 2014 from $2.1 billion in 2013 to $3.86 billion. The firm projects that the Chinese online video market will be worth roughly $8 billion in 2016.
The aggressive acquisitions are impressive - but this next Alibaba revenue driver brings in even more money...
Bullish Alibaba Stock Forecast 2016, Reason No. 2: Singles' Day
In 1993, a holiday for bachelors known as Singles' Day was believed to have originated from Nanjing University in China.
Singles' Day is a holiday for single people to celebrate and was a play on the numbers in the date (11/11). Participants would primarily hang out with other single individuals or go out on dates.
But Jack Ma and Alibaba were able to turn Singles' Day into a commercial holiday. The discount offers from retailers appeal to individuals who are single and in relationships.
Alibaba did not establish a presence for Singles' Day until 2009, when only 27 merchants participated in the holiday. Sales for Singles' Day in 2009 were roughly $100 million, according to Time.
But in just a few short years, Alibaba was seeing billions of dollars in gross merchandise volume (GMV) from China's Singles' Day.
And sales for Singles' Day are growing at an incredible rate...
In just the first eight minutes of Singles' Day in 2015, more than $1 billion had been spent over Alibaba's network of e-commerce sites. Alibaba reported a total of $14.3 billion in GMV, which is 53.76% higher than 2014 Singles' Day totals of $9.3 billion.
In comparison, Cyber Monday sales in the United States for 2015 were $3.07 billion, according to CNBC.
Although the day is supposed to represent individuals who are single, marketer Sheng Li Digital reports that 60% of consumers who buy presents for Singles' Day are actually married.
Ma stated on CNBC that there are more active online shoppers on Alibaba than there are people in the United States, and Ma has a goal to serve two billion people all across the world.
Now for the third - and potentially most lucrative - factor behind Alibaba's profits in 2016...
Bullish Alibaba Stock Forecast 2016, Reason No. 3: Jack Ma
Money Morning Executive Editor Bill Patalon calls BABA a "legacy stock," meaning it's a stock that you will want to own forever.
And the biggest reason is the leadership of Chairman Jack Ma.
Over the last two years, Alibaba has purchased companies in industries ranging from retail, tech, and entertainment. In 2014, Alibaba purchased a 50% stake in China's most popular soccer team for $192 million, according to Bloomberg Business.
But Ma has proven himself a visionary as early as 2004....
Displeased with the flaws in the Chinese banking system, Ma created the first customer-to-customer payment system in 2004, known as Alipay. According to Forbes, Alipay was soon processing nearly 50% of online Chinese e-commerce transactions.
And in 2013, Alibaba gained a larger reach into the financial sector. Alibaba opened a money market product known as Yu'Bao, and 100 million people had opened accounts just a year after Yu'Bao launched.
And we believe Ma's leadership is the biggest reason the Alibaba stock price will soar in 2016.
In a letter to shareholders on Oct. 8, Ma shared his ultimate vision for Alibaba. In the letter, Ma stated, "Our key priorities for the next decade will be globalization, development of the rural economy, and Big Data."
And Patalon praised Ma's vision in September.
"Alibaba's moves into entertainment, media, cloud computing - these are all part of a broad vision Jack Ma and his executive team has for Alibaba," Patalon said.
However, investors need to understand that the Alibaba stock price is still volatile...
Patalon wants Money Morning readers to know that they can't approach BABA stock as a short-term investment. "I knew that, as a hot IPO, there was every chance the stock could - and probably would - sell off," Patalon said.
But Patalon still remains very bullish on the long-term outlook for the Alibaba stock price. Investment research firm Zacks recently joined him. On Nov. 2, Zacks changed its recommendation from "Hold" to "Buy" with a price target of $94.
[mmpazkzone name="in-story" network="9794" site="307044" id="137008" type="4"]
At its opening price of $82.56 this morning (Monday), the Alibaba stock price is now up 21.41% from its IPO price of $68 per share.
The Bottom Line: Under the leadership of Jack Ma, Alibaba is turning into more than just an e-commerce company. Alibaba is now a dominant player in the Chinese video market, has a strong reach in China's financial sector, and sales on Singles' Day are growing year over year. That's why our Alibaba stock price forecast for 2016 shows more profits for investors.
Follow us on Twitter @moneymorning or like us on Facebook.
Profit Alert: Since Money Morning Executive Editor Bill Patalon launched his Private Briefing program just a few short years ago, he's recommended 192 stocks that have either doubled or tripled in value. The service has completely revolutionized the way people invest. Keep reading to find out more about his extensive research and premium stock picks...