Alibaba Group Holding Ltd (BABA): Our Take on Youku Tudou Deal is Neutral, Says RBC Capital
In a research report published Friday, RBC Capital analyst Mark Mahaney reiterated an Outperform rating on shares of Alibaba Group Holding Ltd (NYSE:BABA), with a price target of $80, after the company announced it’s made an offer to acquire the remaining shares of of Youku Tudou Inc (ADR) (NYSE:YOKU) it doesn’t currently own for $26.60 in an all-cash deal.
Mahaney noted, “Financially, we don’t believe the transaction will be that material to BABA. Alibaba’s CFO stated on the deal call that the acquisition would not be impactful to BABA’s FY16 estimates. She added that while Youku is not profitable, its integration should not have a material impact on Alibaba’s EPS or margin structure. Strategically, we view this as part of a broader effort by Alibaba to diversify its revenue streams and broaden its exposure to secular Internet trends in China. We believe synergies are likely to be very limited between Alibaba and Youku, but we do view Youku as one of the stronger digital media assets in China. Our overall take on the deal is neutral.”
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 21.5% and a 62.8% success rate. Mahaney has a -20.1% average return when recommending BABA, and is ranked #6 out of 3779 analysts.
Out of the 34 analysts polled by TipRanks, 32 rate Alibaba Group stock a Buy, while 2 rate the stock a Hold. With a return potential of 34%, the stock’s consensus target price stands at $98.35.