Even when facing a slow-moving macro environment in China, Alibaba Group Holding Ltd (NYSE:BABA) has managed to perform with consistent, steady growth quarter after quarter, notably with a marked mobile take rates beat over desktop take rate in the first quarter, a historic first for the Chinese online retail giant.
From UBS analyst Erica Werkun‘s perspective, BABA shows room for upside “when compared with global peers,” and subsequently reiterates a Buy on BABA, while raising the price target from $107 to $124, which represents a 14% increase from where the stock is currently trading.
First, if BABA can raise its eCommerce take rates on back of sustained digital/mobile adoption, cross-border, and maintained traffic conversion advancements, Werkun recognizes upside potential. Second, Werkun sees opportunity if the giant uses its long runway for brand advertising monetization to cross the platform and connect with users to bolster engagement.
The analyst notes, “While investors now have a more reasonable expectation for sustained growth, we believe scepticism still exists around how Alibaba’s platform efforts (especially monetization) will evolve in a moderating/declining GMV (gross merchandise volume) backdrop.”
Ultimately, “We see rising adoption of online video consumption & an increased willingness for consumers to pay for content as well as a higher tolerance for advertising alongside content,” Werkun concludes.
The analyst raises fiscal 2018 estimates in revenue from Rmb 188 billion to Rmb 195 billion, and boosts adjusted EBITDA from Rmb 87 billion to Rmb 90. Additionally, Werkun adjusts fiscal 2019 revenue projections in revenue of Rmb 222 billion to Rmb 247 billion, adjusted EBITDA of Rmb 102 billion to Rmb 113 billion, and adjusted EPS of Rmb 32.56 to Rmb 36.20.
According to TipRanks, analyst Erica Werkun is ranked #1,280 out of 4,175 analysts. Werkun has an 86% success rate and yields 13.9% in her annual returns. When recommending BABA, Werkun realizes 6.9% in average profits on the stock.
TipRanks analytics demonstrate BABA as a Strong Buy. Based on 23 analysts polled in the last 3 months, 21 rate a Buy on BABA, while 2 maintain a Hold. The 12-month price target stands at $112.47, marking a nearly 4% upside from where the shares last closed.