Analysts are bullish on Chinese e-commerce giant Alibaba Group Holding Ltd (NYSE:BABA) and online retail giant Amazon.com, Inc. (NASDAQ:AMZN) due to long-term growth prospects and recent events, respectively. Let’s take a closer look into recent developments for this pair of electronic commerce giants.
Alibaba Group Holding Ltd
RBC Capital analyst Mark Mahaney weighed in on Alibaba following an investor meeting with management in San Francisco. Mahaney reiterated his Outperform rating with a price target of $89. The report also comes in light of recent Chinese macro and secular trends which indicate a strong potential for long-term growth for the Chinese e-commerce giant.
Mahaney stated, “Even in a slowing Macro environment, the overall shift among Chinese consumers towards consumption spend is a powerful tailwind for BABA.” Alibaba maintains growth opportunities in its mobile monetization and advertising revenue efforts. Mahaney stated, “Alibaba should have significant opportunity to tap into Brand advertising dollars, given how substantial its traffic & closed-loop data are in China.”
Despite some challenges the company faces due to Chinese regulatory measures and its status as a “foreign-owned entity” under Chinese law, the company is seeking methods to convert its current valuable stake in Ant Financial into an equity stake in the event of an IPO. BABA currently holds a 37.5% pre-tax profit share in the online payment service and could hold a 33% equity stake under the term of its current agreement.
According to TipRanks, Mark Mahaney is ranked #12 out of 3,776 analysts. He has a 57% success rate recommending stocks and a 17% average return per rating. Out of the 15 analysts who have rated the company in the last 3 months, 14 are bullish and 1 is on the sideline. The 12-month average price target for Alibaba is $94.14 based on these 15 ranked analysts, marking a 29.97% upside from where shares last closed.
In further expansion of the Amazon’s global delivery infrastructure, the company confirmed its addition of air cargo capabilities to its fulfillment network. Analyst Brian Pitz at Jefferies weighed in on the e-commerce and cloud computing company with a Buy rating and a price target of $775.
Amazon confirmed its agreement with Air Transport Services Group (ATSG) to “lease 20 freighter aircraft for Amazon Fulfillment Services along with operation and logistics services for the fleet.” Pitz stated, “This move strengthens AMZN’s fulfillment network by adding fast connections between major hubs in its US network of 60+ [fulfillment centers] and 23 SCs at a time when consistent/reliable expedited delivery has become critical for eCommerce players.”
The analyst stated, “bringing logistics in-house could both strengthen Amazon’s value proposition (ensuring consistent service levels) and cut costs (in the longer term) for its expedited delivery services.” This is a logical progression in Amazon’s recent efforts to strengthen its infrastructure and build an in-house distribution network. Amazon is also seeking tightened control of its fulfillment network amid heightened competition with its expedited delivery services from Google Express, Postmates and others. Amazon is searching for ways to make price cuts and increase efficiency in order to maintain a competitive advantage.
Pitz has a 63% success rate and an 12% average return per recommendation. The analyst is ranked #126 out of 3,765 analysts. Of 37 analysts on TipRanks who have rated AMZN in the last 3 months, 33 gave a Buy rating while 4 remain on the sidelines. The 12-month average price target of these analysts is $754.42.