RBC Capital Reiterates Outperform on Alibaba Group Holding Ltd Ahead of This Week’s Earnings (BABA)

In a research report released Tuesday, RBC Capital analyst Mark Mahaney shared his expectations on Alibaba Group Holding Ltd (NYSE:BABA), as the company will report March ‘15Q results this Thursday, May 7th before market open. This will be Alibaba’s third quarter reporting as a public company. The analyst reiterated an Outperform rating on BABA, with a price target of $115, which implies an upside of 43% from current levels.


In his research report, the analyst forecasted March Quarter revenue of 17.3 billion RMB, slightly above consensus at 17.2 billion RMB. His projection for EBITDA of 9.7 billion RMB is above the Street of 8.7 billion RMB and his Adjusted EPS estimate of 2.74 RMB is slightly above the consensus estimate of 2.62 RMB.

The analyst stated, “Since BABA reported Dec. ‘14Q earnings, the near-term negatives have been significant: 1) The Street has been resetting its BABA China Retail monetization ramp expectations – takerates should still rise long-term, but the path will be bumpier than expected; 2) Lockup expiration re: 429MM shares on March 17th likely created some supply pressure; & 3) Claims and counter-claims between BABA and China’s State Administration for Industry & Commerce (SAIC) have created material headline risk, though we don’t believe fundamentals risk. We believe that these factors explain some of BABA’s underperformance over the past two months, but longer-term, we believe the BABA Long Thesis is very much intact.”

“BABA remains THE dominant Chinese ecommerce platform, with very robust & consistent Buyer & GMV growth rates (40%+), very high EBITDA margins (50%+), a very consistent management team & strategy, and significant option value in terms of non-retail revenue streams, International expansion, and a sizeable equity stake in Alipay.”, the analyst added.

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 22.3% and a 64.1% success rate. Mahaney has a -20.4% average return when recommending BABA, and is ranked #13 out of 3589 analysts.

In the last quarter, Alibaba had a 40% increase in revenue, bringing in a total of $4.22 billion. However, the company significantly missed analysts’ estimates of $4.45 billion. Moreover, Alibaba has not had the best 2015 thus far as the company was forced to defend itself the day after they released their fiscal third-quarter earnings against Chinese authorities. The authorities claimed the company has not taken action against the sale of fake goods, bribery, and other illegal activities.

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