WWh­hyy OOppppeennhheei­im­meerr ggoott ssoo bbu­ul­l­l­li­is­shh oonn AAl­li­ib­baab­baa

Financial Mirror (Cyprus) - - FRONT PAGE -

Alibaba Group Hold­ing Ltd. (NYSE: BABA) has seen its shares trade higher and higher, although we may have seen a small sell-the-news re­ac­tion to the good news about Sin­gles Day in China. Now, Op­pen­heimer’s an­a­lyst Ella Ji has ini­ti­ated cov­er­age of Alibaba with an Out­per­form rat­ing and a whop­ping $133 price tar­get. What stands out here most is that the high­est an­a­lyst price tar­get at all other bro­ker­age firms on Wall Street is $135.

So, 24/7 Wall St. wanted to see what Ji has got­ten so ex­cited about to make for a con­sen­sus price tar­get that is almost the high­est on Wall Street and about 10% higher than the con­sen­sus price tar­get.

The Alibaba dom­i­nance in e-com­merce is rep­re­sented by the largest user base and un­matched user en­gage­ment, with some 50 or­ders per ac­tive cus­tomer in 2014. That is ex­po­nen­tially higher than av­er­age or­ders for JD.com, Ama­zon.com and other Chi­nese peers.

Another boost was from a solid core growth pro­file, in­di­cat­ing that Alibaba’s Taobao and Tmall will de­liver con­sol­i­dated growth of 14% and 46% from 2014 to 2019 in gross mer­chan­dise value. The firm ex­pects that Taobao will be Alibaba’s business hub that feeds traf­fic to the more prof­itable Tmall, as well as oth­ers in its ecosys­tem.

Op­pen­heimer said: “The world’s largest on­line/mo­bile com­merce plat­form has now de­vel­oped to be one of the most com­pre­hen­sive ecosys­tems glob­ally. In this re­port, we not only dis­cuss Alibaba’s listed as­sets (e-com­merce and cloud), but also pro­vide a de­tailed anal­y­sis of its en­tire ecosys­tem, which adds sub­stan­tial breadth & depth to the listed company. To­gether, they build up a long-last­ing com­pet­i­tive bar­rier to en­try & di­rectly en­hance the listed company’s top-line growth and mar­gin pro­file. We think BABA is one of the best-po­si­tioned com­pa­nies in the China In­ter­net space by virtue of its strong brand, large and loyal cus­tomer base, and com­pelling net­work ad­van­tage.” Other key driv­ers were as fol­lows: - Sig­nif­i­cant up­side for mo­bile, ex­pected to drive 70% of growth in next five years;

- Alibaba’s strate­gic lay­out in­vest­ments to bear fruit over time;

- Tmall Global ex­pected to be a leader in the nascent $25 bln cross­bor­der in­bound e-com­merce mar­ket in China;

- Im­prov­ing com­ple­men­tary ser­vices such as its data man­age­ment plat­form that help mer­chants with user growth and stick­i­ness and even­tu­ally will ben­e­fit Alibaba.

Op­pen­heimer’s $133 price tar­get equates to a price-toearn­ings (P/E) ra­tio of 43, on top of the firm’s 31% earn­ings per share growth and fis­cal 2016 earn­ings of $3.10 per share. Op­pen­heimer’s anal­y­sis also projects a po­ten­tial ben­e­fit of $6.70 per share from Ant Fi­nan­cial, prior to any tax con­se­quences.

Alibaba shares were in­di­cated down 1.6% at $117.25 in the early in­di­ca­tions on Tues­day and opened at about $117.23. Its post-IPO trad­ing range has been $82.81 to $119.45.





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