Analysts from Nomura and Wedbush weighed in on Alibaba Group Holding Ltd (NYSE:BABA) and Alphabet Inc (NASDAQ:GOOGL) ahead of earnings. While one analyst remains on the sidelines with Alibaba due to Chinese economic concerns, the other maintains bullish sentiment on Alphabet, citing favorable growth data and strategic investments.
Alibaba Group Holding Ltd
Ahead of Q3 earnings, analyst Gil Luria of Wedbush weighed in on the e-commerce giant. The analyst expresses positive sentiment regarding the company’s “unique combination of size, growth, and profitability.” He also cites data from the Chinese Bureau of Statistics indicating a stable 11% retail spending by Chinese consumers in December. According to the analyst, this data is in line with “the overall mix shift from investment to consumption in the Chinese economy,” and represents a lack of change in consumer behavior despite “stock market volatility.”
Despite some positive statistics, the analyst states that investor concern over the Chinese economy will negatively impact shares. While he believes the company “can maintain its ~25% growth rate” for the foreseeable future, the analyst cites that Alibaba is losing market share to competitors such as JD, who has a faster growth rate.
As a result of both positive and negative factors, the analyst maintained his Neutral rating and $80 price target on the stock on January 24, 2016.
According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Gil Luria has a yearly average return of 2.8% and a 60% success rate. Luria has a -15.3% average return when recommending BABA, and is ranked #752 out of 3593 analysts.
As of this writing, out of the 22 analysts polled by TipRanks, 21 gave a Buy rating on the company while one remains on the sidelines. The average 12-month price target for the stock is $95.53, marking a 37% increase from where shares last closed.
Analyst Anthony DiClemente of Nomura recently weighed in on Alphabet prior to its Q4:15 earnings report, set to release on February 1, 2016. The analyst is bullish on the company, slightly increasing his estima tes, after favorable data from digital marketing firms. The data indicated U.S. revenue growth resulting from a 30% y/y revenue increase from mobile search and YouTube. For earnings, the analyst is expecting the company to “disclose investment in ‘other bets’,” which represent “a diversified portfolio of businesses targeting some of the largest addressable markets (healthcare, energy, automotive)” led by industry leaders. Regarding these “other bets”, the analyst believes investors will focus on trajectory levels of losses rather than the losses themselves, underappreciating the value.
Another reason for bullishness according to DiClemente is the company’s budgeting. The analyst expects a y/y margin improvement for this quarter, as last year marked a non-recurring expense of $300 million in real estate. He also believes this quarter will mark increased non-GAAP operating income and increased investor confidence related to the stock buyback.
On January 25, 2016, the analyst reiterated his Buy rating and $900 price target on the company, citing “a highly attractive balance of growth and reasonable value vs its peers, particularly given revenue acceleration, margin improvement, and improved disclosure.”
Anthony DiClemente has a 55% success rate recommending stocks with an average return of +6.7% per recommendation.
According to TipRanks’ statistics, all 18 analysts who have rated the company in the past 3 months have expressed bullish sentiment. The average 12-month price target for the stock is $886.79, marking a 20% upside from where shares last closed.