Analysts Chime In on Two E-Commerce Giants: Amazon.com, Inc. (AMZN) and Alibaba Group Holding Ltd (BABA)


Analysts from Oppenheimer and Baird are speculating on Amazon.com, Inc. (NASDAQ:AMZN) and Alibaba Group Holding Ltd (NYSE:BABA) from confident stances. Oppenheimer chimes in as to what Amazon’s new focus on the auto parts sector entails for both the giant as well as for apprehensive investors, whereas Baird provides a positive perspective on Alibaba after a solid fiscal third-quarter earnings delivery.

Let’s take a closer look:

Amazon Has Its Aim Set on Auto Parts Sector

Amazon has a new bull’s eye target on the auto parts sector, as revealed in a New York Post article yesterday.

Oppenheimer analyst Brian Nagel notes that while he does not deem this move as a “slam dunk” for the e-commerce and online auction leader, he nonetheless reiterates an Outperform rating on shares of AMZN with a $900 price target, which represents a 10% increase from where the stock is currently trading.

Nagel believes, “We have for a while looked favorably upon near- and longer-term prospects for the aftermarket auto parts space and, in particular, leading chains such as AutoZone (AZO) and O’Reilly Auto (ORLY) owing to still improving demand growth and outsized returns on capital. We chatted for a while this morning with senior management of AZO. In our view, the Post article does not necessarily raise new concerns for the space, but could further unnerve already uneasy investors, wary of the threats of online retail upon traditional chains.”

However, “We have learned to never dismiss the threat of AMZN, which according to market estimates, has already reached about $3B in auto parts sales. That said, as we consider the push of AMZN into the aftermarket auto parts business, we believe that most share acquired by the online enterprise will be garnered primarily from other, low-touch, price-focused sellers,” Nagel surmises.

As usual, we like to include the analyst’s track record when reporting on new analyst notes to give a perspective on the effect it has on stock performance. According to TipRanks, four-star analyst Brian Nagel is ranked #851 out of 4,359 analysts. Nagel has a 53% success rate and earns 3.0% in his annual returns. When recommending AMZN, Nagel yields 72.0% in average profits on the stock.

TipRanks analytics exhibit AMZN as a Strong Buy. Out of 33 analysts polled by TipRanks in the last 3 months, 31 are bullish on Amazon stock and 2 remain sidelined. With a return potential of 16%, the stock’s consensus target price stands at $951.16.

A Bullish Glance into Alibaba’s FQ3 Print

Alibaba has left top analyst Colin Sebastian at Baird cheering after the Chinese online retail giant outclassed expectations with its fiscal third quarter earnings. Thanks to a robust 45% year-over-year rise of core commerce growth, sustained improvement in mobile monetization, and a 115% year-over-year surge in Cloud services, the analyst sees shining opportunities ahead.

Therefore, on back of the print, the analyst reiterates an Outperform rating on BABA with a price target of $110, which represents a close to 9% increase from where the shares last closed.

For the fiscal third quarter, the giant saw revenues of ¥53.2 billion, denoting a 54% year-over-year growth that outperformed the consensus forecast of  ¥50.2 billion as well as Sebastian’s ¥49.1 billion projection.

Sebastian underscores, “As a reminder, the acquisition of Youku Tudou (digital video) was completed in F1Q17, which accounted for Digital Media/Entertainment growth of +273% Y/Y to ¥4.1B vs. ¥1.1B in F3Q16.”

Meanwhile, the giant reached adjusted EBITDA of ¥27.02 billion, showcasing a 51% margin that also hit ahead of consensus of ¥23.8 billion and a 49.6% margin, but aligning with the analyst’s margin estimate.

From Sebastian’s eyes, cloud services remain a strong point for BABA, as he elaborates, “Aliyun (cloud services) continued to grow rapidly in F3Q, albeit in-line with consensus expectations, with more than 765,000 paying customers, doubling Y/Y from 383,000 in F3Q16. BABA has significantly improved cloud margins, with segment EBITDA margin of -5% vs. -41% in F3Q16, the result of economies of scale in addition to robust revenue growth.”

Furthermore, with mobile trends on the rise, the analyst highlights, “Mobile revenue of ¥32.5B (+73% Y/Y) now accounts for 80% of China Commerce revenue, up from 65% in F3Q16. Mobile MAUs grew 25% Y/Y to 493M as BABA continues to execute on its “mobile-first” e-commerce strategy.”

Between a “solid FCF generation,” continued “cloud computing momentum,” a “segment profitability breakout” and mobile trends that “remain encouraging,” the analyst concludes that after a strong fiscal third-quarter, he has even greater confidence in BABA shares.

Colin Sebastian has a very good TipRanks score with a 76% success rate and a high ranking of #14 out of 4,359 analysts. Sebastian garners 17.3% in his yearly returns. When recommending BABA, Sebastian yields 21.1% in average profits on the stock.

TipRanks analytics demonstrate BABA as a Strong Buy. Based on 14 analysts polled by TipRanks in the last 3 months, all 14 rate a Buy on BABA stock. The 12-month average price target stands at $121.83, marking a nearly 24% upside from where the stock is currently trading.

More stocks covered by top performing analysts can be found here.

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