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Thursday’s Street Insights: Alibaba Group Holding Ltd (BABA) Climbs on Earnings Beat, Cisco Systems, Inc. (CSCO) Tumbles on Switching Fall


 

Alibaba Group Holding Ltd (NYSE:BABA) shares are up nearly 4% in Thursday’s trading session, after the Chinese e-commerce giant reported yet another blockbuster quarter, surpassing Wall Street estimates. Specifically, Alibaba reported revenue of $7.4 billion, beating the consensus estimate of $7.1 billion. In addition, the company reported adjusted earnings of $1.17, beating the consensus estimate of 92 cents.

Alibaba CEO Daniel Zhang stated,”Alibaba had a strong start to fiscal 2018, reflecting the strength and diversity of our businesses and the value we bring to customers on our platforms. Our technology is driving significant growth across our business and strengthening our position beyond core commerce […] We are excited about the future as we continue to innovate and drive synergies among the businesses throughout the Alibaba ecosystem.”

CFO Maggie Wu added, “We delivered excellent results in the first quarter, with robust revenue growth of 56%. The significant growth in customer management revenue represents the differentiated business value we provide to our customers […] It is our intention to continue investing in long-term growth opportunities, some of which are already delivering significant value to customers and investors.”

On the ratings front, Alibaba has been the subject of a number of recent research reports. In a report issued on August 15, Stifel Nicolaus analyst George Askew assigned a Buy rating on BABA, with a price target of $180, which implies an upside of 8% from current levels. Separately, on August 14, Jefferies’ Karen Chan reiterated a Buy rating on the stock and has a price target of $160.

According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, George Askew and Karen Chan have a yearly average return of 14.8% and 24.7% respectively. Askew has a success rate of 63% and is ranked #431 out of 4627 analysts, while Chan has a success rate of 83% and is ranked #183.

Cisco Systems, Inc. (NASDAQ:CSCO) shares tumble 4% after the network equipment maker reported roughly in-line fiscal fourth quarter results and Oct.-quarter guidance. However, Cisco’s core business of selling data center switches and routers continues to slump. Switching was weak in the quarter, with a 10%+ Y/ Y decline in campus switching and flat revenues in the data center.

Cisco CEO Chuck Robbins commented, “We had another strong quarter and a transformative year. We made tremendous progress transitioning our business to more software and recurring revenue and delivered on our commitment to accelerate innovation in our core and across the portfolio […] The network has never been more critical to business success and we are building the network of the future.”

BMO Tim Long noted, “Cisco reported a decent quarter and outlook as the transformation of its business to a recurring revenue model is encouraging, but it remains too early to get excited. Cisco continues to lag its competitors in switching, and security revenue weakness highlights the lag between strong subscription growth and revenue timing. While the stock is relatively inexpensive, we do not see any meaningful near-term catalysts. We remain Market Perform on the shares.” (To watch Long’s track record, click here)

Overall, 8 research analysts have assigned a Hold rating and 17 research analysts have given a Buy rating on BABA. When considering if perhaps the stock is under or overvalued, the average price target is $35.57 which is 13% above where the stock opened today.

 

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