Why This Top Analyst Sees ~$120B Market Opportunity For Alibaba

In a report published Wednesday, SunTrust Robinson Humphreys analyst Robert S. Peck maintained a Buy rating and price target of $110 on

. The analyst believes that the Aliyun business could contribute close to $1 billion in revenue by FY2018. "While Aliyun only accounts for <2 percent of revenues currently, we believe that "public cloud IT" is something that inherently fits into Alibaba's core mission of helping connect people and making it easier for people to do business," Peck stated. The company's CEO, Daniel Zhang, as well as Head of IR, Jane Penner, had recently announced that one of the largest opportunities for Alibaba, outside China retail, was Alicloud. The analyst believes that this business is reaching an inflection point. According the IDC, the public IT cloud market in the US and China are likely to touch $80 billionby 2018, along with another $40 billion from the rest of the world. IDC also reported that Aliyun had been the market leader in 1H14, with 23 percent market share. "We think several drivers support the Chinese marekt growth, including: Chinese government support of cloud; continued transitioing of offline businesses to online; overall accelerating China IT spend," the SunTrust report said. The analyst believes that the Chinese market is still quite under-penetrated, as compared ot the US market, offering significant opportunity for the company. Alibaba is expected to cross the $1 billion mark within just three years. "We also point out that Aliyun could grow faster, as the cloud market is better understood and embraced," Peck added, while stating, "With this incremental opportunity in addition to the core GMV goal of $1 trillion, we think there is a very long runway for the company to execute against."