Alibaba Group Holding Ltd (BABA): Top Analyst Sets High Expectations After Record Singles Day Turnout

Youssef Squali sees room for BABA to score upside should its retail revenue momentum continue to soar.


If you’re single, you might want to consider moving to China, as Alibaba Group Holding Ltd (NYSE:BABA) has created the kind of anti-Valentine’s Day shopping extravaganza that many flying solo in the states spend on holiday lattes.

In China, BABA offers amazing deals in an annual Singles Day that top analyst Youssef Squali at SunTrust believes “lived up to its hype,” outclassing the tail-end of his 29% to 35% growth forecast.

What does it mean that “Singles Day shatters old record?” Squali bets that this “bodes well” for the third fiscal of 2018, bolstering his bullish perspective on the king of Chinese e-commerce. For context, during Saturday’s Singles Day, BABA saw GMV of RMB168.3 billion ($25.4 billion), experiencing a +39% year-over-year surge, and (+43% (FXN)).

In reaction, the analyst reiterates a Buy rating on BABA stock with a price target of $210, which implies a 12% increase from current levels.

Squali notes, “Strong Chinese consumer buying, 4x growth in global brands, strength in cross border trade, rise of New Retail and ubiquity of mobile drove this outsized performance, and bode well for the company’s Dec. quarter.” Looking ahead to the third fiscal quarter for 2018, the analyst forecasts China Retail revenue will grow 45% year-over-year, experiencing overall revenue gains of 44% compared to the 54% seen in the third fiscal quarter of the year before. In other words, should “this momentum [be] sustained,” Squali is angling for potential upside.

One key catalyst that worked in Alibaba’s favor was that mobile trends soared “higher.” The analyst writes, “While mobile was already a big driver of prior years’ GMV growth, the percentage of Mobile GMV as a percentage of total GMV this year increased to 90%, versus 82% and 69% in 2016 and 2015, respectively. Beyond being a tailwind to growth in GMV, this trend is especially a tailwind to revenue growth as mobile take-rates have exceeded desktop take-rates in the last year.”

Meanwhile, as BABA’s “new retail” strategy to lessen the gap between online and offline retail spheres has already expanded TAM past the online world, and Squali finds it already “seems to be starting to get traction,” adding, “At this year’s Singles’ Day, brands were more ready, and better able to engage customers and improve shopper experiences to drive engagement and sales.”

With this being Alibaba’s first year owning the majority of Cainiao, the analyst pinpoints delivery orders flew up from 657 million to 812 million, and he deems this delivery network gives BABA an upper hand against its rivals; especially taking under account the e-commerce platform’s latest $15 billion reveal of plans to create more capacity.

With TAM on the climb in the bigger picture, these macro trends should keep treating BABA well “as more users get online in China and their spending rises with the growing middle class,” Squali contends.

Youssef Squali has a very good TipRanks score with a 72% success rate and a high ranking of #64 out of 4,702 analysts. Squali realizes 18.7% in his yearly returns. When recommending BABA, Squali garners 29.1% in average profits on the stock.

Wall Street loves this e-commerce player, which has earned one of the strongest consensus ratings, with TipRanks analytics exhibiting BABA as a Strong Buy. Based on 19 analysts polled by TipRanks in the last 3 months, all 19 rate a Buy on Alibaba stock. The 12-month average price target stands at $211.83, marking a nearly 13% upside from where the stock is currently trading.