Analysts are weighing in on the Chinese e-commerce giant Alibaba Group Holding Ltd (NYSE:BABA) and retail giant Wal-Mart Stores, Inc. (NYSE:WMT). The analysts reflect on Alibaba’s Mobile Monetization opportunity, and Wal-Mart’s oil and gas opportunity.
Alibaba Group Holding Ltd
Based on survey of 1,500+ Chinese Online consumers and analysis of Alibaba’s Mobile Monetization opportunity, RBC Capital analyst Mark Mahaney reiterated an Outperform rating on Alibaba shares, with a price target of $95, which implies an upside of 18% from current levels.
Mahaney wrote, “We conducted our first annual survey of 1,500+ Chinese Online consumers to track trends in China’s Online Retail market and to assess Alibaba’s competitive position. All in, our survey highlighted a robust China Online Retail market and a strong position for Alibaba, with a few caveats.”
The analyst continued, “We see a distinct possibility that Alibaba’s China Online Retail segment is at a Monetization inflection point. Based on quarterly trends, public commentary and our discussions with management, we believe recent Mobile Monetization improvement trends are sustainable, driven by: 1)Increased Mobile usage; 2)Tmall successfully attracting higher quality advertisers/merchants; and 3)Ad product innovation. We believe that this Monetization inflection point may be underappreciated by investors. Our analysis suggests that every 10% upside in Mobile Monetization (Revenue/GMV) generates $1.7B (~11B RMB) in incremental China Retail Revenue and $0.25 (1.61 RMB) in incremental EPS.”
“We see the realization of this Mobile Monetization opportunity as potentially driving upward estimate revisions and providing a material catalyst to shares,” Mahaney concluded.
According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Mark Mahaney has a total average return of 22.6% and a 65.8% success rate. Mahaney has a -5.2% average return when recommending BABA, and is ranked #3 out of 3618 analysts.
Wal-Mart Stores, Inc.
Nomura Holdings analyst Robert Drbul was out pounding the table on Wal-Mart, reiterating a Buy rating and price target of $70, which implies an upside of 17% from current levels.
Drbul wrote, “As a follow-up to our 2016 Outlook, we expand on our belief that WMT is positioned well to outperform in 2016 as our favorite low oil & gas play. Given the renewed decline in crude oil prices, with WTI crude approaching $35 (down 33% YTD), concerns around the economic impact of reduced business investment in the oil/gas extraction sectors persist. We continue to believe, however, that the benefits to the consumer of declining energy prices (incremental cash) will outweigh the economic risk. We also believe retailers in general stand to benefit from rising disposable incomes.”
The analyst concluded, “Walmart is our top low oil and gas idea for two key reasons: 1) we believe lower income demographic consumers stand to benefit most from lower gas prices, and 2) we believe its private transportation fleet (>6,650 trucks; one of the largest in the world) will realize cost benefits due to lower fuel prices.”
According to TipRanks.com, analyst Robert Drbul has a total average return of 12.9% and a 69.2% success rate. Drbul has a 2.7% average return when recommending WMT, and is ranked #186 out of 3618 analysts.
Out of the 20 analysts polled by TipRanks, 3 rate Wal-Mart Stores stock a Buy, 15 rate the stock a Hold and 2 recommend Sell. With a return potential of 11.2%, the stock’s consensus target price stands at $66.63.