Analyst Rob Sanderson of MKM Partners gave his take on Chinese e-commerce giant Alibaba Group Holding Ltd (NYSE:BABA) ahead of its fiscal first-quarter earnings next Thursday, August 11. Sanderson is expecting to see a solid report that shows user growth and increases in monetization.
The analyst will keep an eye on the profitability of Alibaba’s core business and its investment business. This should be easier to judge as Alibaba is separating revenues from Media & Entertainment from Marketplaces. He also warns that currency valuations will remove 2% of his USD revenue estimates. Overall, he thinks Alibaba is “the premium asset in the fastest growing eCommerce economy, with a broader ecosystem than its U.S. contemporaries.”
Sanderson points to several developments that are causing him to be bullish towards Alibaba. First, big data is allowing for better targeting, conversion and return on investment for Alibaba. It reported that its conversion rates for performance marketing have increased from 30% to 80%, crediting this to smarter segmentation.
A major factor for the Chinese when it comes to decisions is recommendations from friends and family. Taobao, Alibaba’s online shopping platform, has experienced such incredible growth because Alibaba has leveraged this characteristic and made the website into a social commercial platform.
Sanderson is “impressed by BABA’s dominant ecosystem and management’s ability to execute long-term goals.” He also thinks that the company has an “excellent platform, a strong track record and is investing in ripe areas.”
The analyst maintained his Buy rating with a price target of $95, marking a 13.5% increase from current levels.
According to TipRanks, the analyst has a yearly average loss of 2.3% and a 53% success rate. The analyst has a 4.2% average return when recommending BABA, and is ranked #3,374 out of 4,071 analysts.
TipRanks shows that out of the 22 analysts who rated BABA in the last 3 months, 91% gave a Buy rating and 9% gave a Hold rating. The average 12-month price target for the stock is $100.83, marking a 20.51% upside from current levels.
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