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Alibaba Group Holding Limited’s BABA cloud computing arm, Alibaba Cloud recently expanded its partnership with an enterprise application software company, SAP SE (SAP). The partnership is aimed at creating a seamless transition to cloud infrastructure for enterprises, and better management of scalable workloads and critical applications.

The deal will enable its customers to run a range of SAP solutions on Alibaba Cloud and SAP HANA Cloud platform, the predominant money-spinning offering of SAP, under any operating system.

Coming to the share price, the company's shares have gained 67.2% in the past 12 months, outperforming the industry’s rally of 48.99%.

SAP makes software to handle business processes and offers cloud-computing, machine-learning and data-analysis services. SAP is steadily emerging as a frontrunner in the enterprise software business and the recent deal is expected to widen the company’s customer base. The company’s 80% customers are from small and medium-sized businesses.

More on the Headlines

Alibaba Cloud’s relationship with SAP China dates back to 2016. Alibaba was one of the first companies in China to pass SAP’s certification to run SAP Business Suite on Alibaba Cloud in December 2017.

In 2017, Alibaba Cloud was Certified for SAP HANA on Alibaba Cloud’s enterprise-level memory-enhanced ECS. Presently, Alibaba Cloud expanded its support to other SAP systems. Alibaba also passed the certification to run SAP Business One on HANA on Alibaba Cloud.

The business enterprises can now use Alibaba Cloud’s infrastructure and computing power to run a variety of SAP solutions. Both the companies will work together to develop innovative solutions for catering to the needs of the customers in a more efficient way.

Alibaba Group Holding Limited Price and Consensus

 

Alibaba Group Holding Limited Price and Consensus | Alibaba Group Holding Limited Quote

Bottom Line

Alibaba needs to buck up as competition in the cloud computing market is intense, particularly with players like Amazon already ruling, and Microsoft and Alphabet determined to strengthen their positions in the fast-growing segment.

Cloud still remains an expanding market with high growth prospects. In a recent report, Gartner projected the public cloud market to reach $411.4 billion by 2020. According to International Trade Administration, the Chinese cloud market is likely to touch $20 billion mark by 2020, witnessing a compounded annual growth rate of 40%.

We believe that Alibaba, with its ongoing initiatives, is well poised to grab the growth opportunity and the cloud computing will be one of its major growth drivers in the long run.

Zacks Rank & Stocks to Consider

Alibaba currently carries a Zacks Rank #3 (Hold).Some better-ranked stocks in the technology sector are Littelfuse, Inc. LFUS, Groupon, Inc. GRPN, both sporting a Zacks Rank #1 (Strong Buy), while Amazon.com, Inc. AMZN, holding a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings per share growth rate for Littelfuse, Groupon and Amazon is projected at 12%, 6.5% and 30.2%, respectively.

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