Alibaba Is 'Investing For The Day After Tomorrow'

SunTrust's Bob Peck was out with a note Wednesday morning that called Alibaba Group Holding Ltd BABA "compelling" at current valuations, despite immediate headwinds. SunTrust reiterated its $110 price target on the stock.

Specifically, Peck outlines four immediate near-term pressures that have created this buying opportunity.

1. The lock-up expiration Wednesday and on September 18 will have a minimal impact as the recent share price decline and long-term outlook will offset immediate pressures.

See Also: How Will The Lockup Expiration Affect Alibaba's Stock?

2. Alibaba is making changes to its keywords and sorting algorithm that will lower monetization in the near term. However, Peck said that the changes are similar to changes that Google Inc GOOG made and will help Alibaba to do better with mobile and monetization.

3. Alibaba is making changes to eliminate counterfeit goods that will slow expansion and increase costs. But, Peck said, this will "enhance quality on the site."

4. The company is losing "high-margin lottery sales."

So, with the stock down 18.7 percent year-to-date, SunTrust recommends that long-term investors start accumulating shares. The company is "making moves" around core products – all with the goal of improving the company for the "day after tomorrow."

See Also: Morgan Stanley: Time To Build Positions In Alibaba

Shares of Alibaba closed Tuesday at $84.50, up less than 1 percent on the day.