RBC’s Top Analyst Bullish on Alibaba Group Holding Ltd (BABA) Following Strong Q1:17

Chinese online retail giant Alibaba Group Holding Ltd (NYSE:BABA) just posted strong financial results for its first quarter of the fiscal year. With revenue heading in the right direction across the board, RBC Capital top analyst Mark Mahaney reiterated an Outperform rating on the stock, and slightly raised the price target from $105 to $110.

Alibaba brought in revenue for the June quarter of $32.15 billion RMB, compared to consensus of $30 billion and Mahaney’s projection of $26.4 billion. BABA’s EBITDA for the June quarter marked $14.9 billion RMB, also outclassing consensus of $13.2 billion and Mahaney’s expectation of $12.6 billion. Meanwhile, Alibaba’s non-GAAP earnings per share (EPS) of 4.90 RMB also hit above the Street’s estimate of $4.56 RMB and Mahaney’s expectation of $4.14 RMB.

Alibaba beat the Street’s projections, with organic revenue marking growth of 47% year-over-year that demonstrated a historic surge, the fastest growth yet, over the past seven quarters. Mahaney attributes this to monetization improvement for Mobile and Desktop, with mobile monetization surpassing desktop monetization in a milestone first for Alibaba. Mahaney asserts, “We believe monetization will continue to trend higher.” As such, Mahaney adjusted his forecast of EBITDA for the fiscal year of 2017 with an increase to $77B RMB.

Mahaney contends, “Fundamental trends are robust for BABA, and driven by Mobile, which we believe will help sustain premium growth rates in the Core China Commerce segment. BABA also continues to demonstrate high levels of profitability […] China Macro is a concern, but Internet Secular trends can offset much of this. […] Finally, we see BABA as having significant option value from non-retail/platform revenue streams in China, possibly International expansion & a series of major strategic investment.”

For now, Mahaney views the corporation’s growth trends as rising. Praising the company’s management team and “sound l-t strategy,” the analyst remains bullish on BABA for the foreseeable future.

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, top five-star analyst Mark Mahaney has achieved a high ranking of #6 out of 4,110 analysts. Mahaney solidly upholds a 67% success rate while yielding 20.4% in his annual returns. When recommending BABA, Mahaney earns 0.1% in average profits on the stock.

TipRanks analytics exhibit BABA as a Strong Buy. Based on 23 analysts polled in the last 3 months, 21 rate a Buy on Alibaba, while 2 maintain a Hold. The average price target is $104.93, marking a 14% upside from where the stock is currently trading.

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