Oppenheimer Reiterates Mixed Ratings on Alibaba Group Holding Ltd (BABA) and TASER International, Inc. (TASR)

Analysts at Oppenheimer try to clear up uncertainties surrounding future growth for Alibaba Group Holding Ltd (NYSE:BABA) and TASER International, Inc. (NASDAQ:TASR). Below, analysts discuss a range of business that will contribute to Alibaba’s growth as well as TASER’s new Auxon body camera.

Alibaba Group Holding Ltd

Analyst Jason Helfstein attempts to clear up some major misunderstandings about Alibaba that are affecting the company’s valuation. These issues include non-core investments, accounting quality and its counterfeiting controversy. The analyst also dives into several of Alibaba’s assets that he believes will benefit the company.

Ant Financial, China’s most valuable financial technology company, was formerly Alibaba’s online payment business called Alipay. It was recently spun off before experiencing a record $25 billion IPO in 2014, but is still run by Alibaba Executive Chairman Jack Ma. Investors are uncertain about Ant Financial’s value and the benefits of owning BABA. The analyst believes the 2014 Share and Asset Purchase Agreement, which states that Alibaba is entitled to share 37.5% of AFG’s pre-tax earnings, will only benefit Alibaba.

Helfstein also writes about investors’ aversion of Cainiao, a three-year-old Alibaba-backed logistics firm. He believes that this feeling is mostly due to its business model being widely misunderstood. Cainiao has an “asset-light nature” and the analyst believes there are legitimate growth opportunities due to Cainiao “leveraging an efficient model to address a massive, fragmented, but underdeveloped industry.”

Helfstein continues his discussion of Alibaba by emphasizing his opinion that Alibaba’s AliCould will lead to a market reevaluation of Alibaba, similar to what happened to Amazon in 2015. China’s cloud industry is close to experiencing massive growth and the analyst believes AliCloud is in the best position to take advantage of this growth. AliCloud’s leadership in infrastructure, middleware, security and pricing should help it differentiate itself from its competition.

These factors led the analyst to increase his FY17/18 revenue estimates by 5% and 7% respectively. Helfstein reiterated his Outperform rating for Alibaba with a price target of $110 per share, marking an increase of 39% from current levels.

According to TipRanks.com, analyst Jason Helfstein has a yearly average return of 6.4% and a 51% success rate. Helfstein has a 5.5% average return when recommending BABA, and is ranked #348 out of 4035 analysts.

Out of the 19 analysts who have rated the company in the past 3 months, 95% gave a Buy rating and 5% gave a Hold rating. The average 12-month price target for the stock is $100.38, marking a 27.08% upside from current levels.

TASER International, Inc.

Following an earlier report, analyst Andrew Uerkwitz, continued to discuss TASER’s Axon body camera. The Auxon body camera is on-officer video cameras that provides a convenient option for officers who are looking for world-class functionality in a simple design. He was looking for patterns regarding the product and trying to predict the timing of the camera’s pilot phase to camera rollout. This timing is crucial to “determining near-/mid-term profitability.”

The analyst came up with three findings before arriving at his conclusion for TASER. First, he mentions management’s assumption that ASP will increase over time and his belief that it is unlikely Operating Expenses will decline over time. Uerkwitz then states that EPS is TASER’s most important long-term metric. It is easier for the analyst to be bullish on EPS growth based on management’s view of increasing ASP.

The analyst concludes that regardless of how he breaks down TASER and its Axon camera, “at-scale or even break even is multiple, years away.” His best case scenario for Axon reaching breakeven is 2019 with at-scale occurring in 2022 with an operating margin of 17%.

Management’s assumptions, especially a growing ASP, led the analyst to determine there are too many risks to support TASER’s current evaluation. He wants to see evidence of an “ASP lift, faster booked-to-paid stea conversions, or traction in new services” before buying into the evaluation.

Uerkwitz maintained his Perform rating and didn’t state a 12-18 month price target. The analyst has a success rate of 53% with an average return of 5.4% per recommendation.

According to TipRanks, out of the 5 analysts who have rated the company in the past 3 months, 80% gave a Buy rating and 20% gave a Hold rating. The average 12-month price target for the stock is $27.25, marking a -0.18% downside from current levels.


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