Alibaba Group Holding Ltd. (NYSE: BABA) reported results last Thursday that included higher-than-expected revenues and lower-than-expected profits. A revenue jump of nearly 40% was the primary driver for a stock price boost of around 4%. Shares still trade down more than 2.5% for the year to date, even though they’ve gained nearly 30% since mid-February.
The good news for Alibaba and its investors is that the company’s cut of each sale (the so-called take rate) rose from 2.17% a year ago to 2.47% in the first quarter. That’s important because gross merchandise value growth has slowed from a growth rate of 43% in the same period for the past two years to 24% in the past quarter.
The company’s profits are expected to be squeezed by investments in Ant Financial and recent acquisitions. Barron’s cited a Morgan Stanley analyst who thinks that fiscal year 2017 earnings could be lowered by 11% to pay for these investments. That’s no reason to dump the stock though; Morgan Stanley rates the stock as Overweight with a price target of $112.30 a share.
Merrill Lynch offered this rationale for reiterating its Buy rating and boosting the price target by $3 a share to $99:
We expect Alibaba to remain the leading eCommerce co[mpany] by transaction value. Its leadership position enables it to benefit from industry growth and economies of scale. Alibaba has industry leading investment in R&D to facilitate cross-selling and targeted advertising. Hence there should be room for marketing revenue to grow. It also runs industry leading B2B and cloud computing, and has option value in Ant Financials (not part of Alibaba Group). Lower-margin media biz has limited earning impact.
Other analysts’ reactions were uniformly positive:
- Brean raised its price target from $96 to $100.
- Citigroup raised its price target from $93.70 to $95.60 with a Buy rating.
- Credit Suisse upped its target from $96 to $100 with an Outperform rating.
- Deutsche Bank raised its target price to $110 from $109.
- JPMorgan boosted its price target from $88 to $96 and has an Overweight rating on the stock.
- Raymond James lifted its target from $85 to $95 with an Outperform rating.
- S&P Capital IQ raised its price target from $90Â to $95 and reiterated a Strong Buy rating.
- Wedbush raised its price target from $75 to $80.
Shares closed up fractionally to $79.20 on Friday, in a 52-week range of $57.20 to $95.06. The consensus price target on the stock is $91.91, and it is unlikely that all the recent changes have yet be figured in.
Take This Retirement Quiz To Get Matched With A Financial Advisor (Sponsored)
Take the quiz below to get matched with a financial advisor today.
Each advisor has been vetted by SmartAsset and is held to a fiduciary standard to act in your best interests.
Here’s how it works:
1. Answer SmartAsset advisor match quiz
2. Review your pre-screened matches at your leisure. Check out the advisors’ profiles.
3. Speak with advisors at no cost to you. Have an introductory call on the phone or introduction in person and choose whom to work with in the future
Take the retirement quiz right here.
Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.
Editors' Picks
