Top Analyst Chimes In on Alibaba Group Holding Ltd (BABA) Following Tech Summit
Baird analyst Colin Sebastian weighs in today on shares of Alibaba Group Holding Ltd (NYSE:BABA), after the Chinese ecommerce giant held its inaugural tech summit, called “New Technology, New Future” at its Hangzhou headquarters on March 9, with over 5,000 engineers in attendance.
Sebastian wrote, “With over 20,000 engineers on staff, Alibaba has already made a clear commitment to developing cutting-edge technology, but Jack Ma hopes the R&D restructuring efforts will give engineers a more refined focus and turn the company’s projects from figurative “hand grenades” to “missiles.” We believe these advances in R&D will benefit Alibaba’s broader platform through integration with existing products and services.”
“While Ma did not specify spending or hiring targets, we anticipate new investments and a potential ramp in headcount could lead to elevated R&D expenses (product development expenses were 13.6% of revenue in FY16). Profitability in Alibaba’s core commerce business (64% EBITDA margin in F3Q17) continues to provide funding for growth investments in Cloud/Digital media, and we believe the company’s focus on building market share in these areas may lead to an uneven pace of future margin expansion,” the analyst continued.
Sebastian reiterated an Outperform rating on shares of Alibaba, with a price target of $116, which implies an upside of 13% from current levels.
According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Colin Sebastian has a yearly average return of 19.7% and a 78.5% success rate. Sebastian has a 23.5% average return when recommending BABA, and is ranked #17 out of 4539 analysts.
Out of the 26 analysts polled in the past 12 months, 25 rate Alibaba Group stock a Buy, while 1 rates the stock a Hold. With a return potential of 19.5%, the stock’s consensus target price stands at $122.92.