Alibaba Is On Its Way To Its IPO

By Carly Forster

Alibaba (BABA) is a Hangzhou, China based e-commerce website that promotes the leading online and mobile forums in retail and wholesale trade, as well as cloud computing and other services. According to Alibaba’s website, the company provides technology and services to enable consumers, merchants, and other participants to conduct commerce in its ecosystem.

Alibaba In The News

For over a year, the e-commerce website has been in talks with investors about its possible $24 billion initial public offering. Starting on Monday, September 15th, Alibaba is set to begin a roadshow in order to pitch investors over a two week time span.

A Financial Expert’s Opinion

On September 8th, Atlantic Equities analyst James Cordwell was the first analyst to initiate coverage of Alibaba.  He issued an Overweight rating and $100 price target, suggesting over 50% upside from the top-end of the IPO range. He reasoned, “With ~80% of Chinese ecommerce, the company has established a strong position in this rapidly growing market, which we expect it to maintain despite ongoing intense competition.” He added, “… Alibaba’s scale, broad reach beyond Tier 1/2 cities and brand support should enable it to broadly maintain its share of the Chinese ecommerce market, which we expect to grow at a >30% CAGR over the next three years>.”

Cordwell’s Past Recommendations

Cordwell has a history of rating popular and well-known companies, such as Twitter (TWTR) and Apple, (AAPL), helping him earn a 63% success rate recommending stocks with a +29.6% average return.

On November 4, 2013, Cordwell initiated an Overweight rating on Twitter with a $34 price target. He wrote, “We expect strong top line growth persisting in FY14 as the company expands its ad offerings in the US and better monetizes its international users. This leaves the stock attractively valued at the IPO price, though improving user engagement and ad pricing trends will be key for the stock to deliver upside on a longer-term view.” Cordwell has a 100% success rate in recommending Twitter, helping him earn a +51.7% average return on the stock.

Similarly, on April 24, 2013 Cordwell maintained an Overweight rating for Apple, but lowered his price target from $550 to $500. He noted, “Q2 saw revenue upside but gross margin fell short due to a mix shift to lower ASP iPhone/iPads, a trend which seems set to continue. Commentary also implies no new products until fall, meaning Q4 may not offer the inflection we’d expected. More positively, the FY14 product pipeline sounds stronger and Apple raised its dividend/buybacks.” Coldwell has a 50% success rate in recommending Apple, helping him earn a +8.0% average return on the stock.

However, Cordwell has not always been so lucky with his recommendations. On December 16, 2011 he downgraded Blackberry (BBRY) from Neutral to Underweight and cut his price target from $26 to $11. He reasoned, “With the stock already down nearly 75% year-to-date, RIM’s challenges are clearly well recognized, but with earnings estimates continuing to see significant downward revisions we see further price erosion from here.” Coldwell has a 0% success rate recommending Blackberry, attributing to Cordwell’s -4.4% average return on the stock.

Cordwell likes to rate the big-named stocks. Do you trust his latest recommendation based on his financial advice history?


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