January 28, 2016, 10:42 P.M. ET
By Shuli Ren
Alibaba Group (BABA) fell 3.8% despite reporting better-than-expected December quarter revenue growth, because investors were worried about its slowing GMV growth, a metric that demonstrates China’s strong macro headwinds.
Equity analysts are coming to Alibaba’s defense this morning. This blogger flipped through major brokerages’ reports. They all praised Alibaba’s ability to convert more transaction volume into revenue, i.e., its improving monetization rate. Alibaba’s take-rate improved for the second quarter, rising to 2.98% versus 2.7% last year.
So confident are they of Alibaba’s operations that Deutsche Bank and HSBC even tweaked up their targets. Deutsche Bank lifted its target by 3% to $102:
Company management encouragingly suggested a “de-coupling” between e-commerce growth and broader macro-economic trends… We were pleasantly surprised with Alibaba’s confident views around growth despite these more precarious times.
Management sounded constructive on margins, leading us to regard a low-50′s non-GAAP EBITDA margin as quite feasible for the foreseeable future.
We cut FY16/17/18E GMV by 2%/4%/4% on Tmall slowing, competition. We lift FY16/17/18E revenue by 2%/1%/1% on a strong take rate; increase non-GAAP EBITDA by 90bps/150bps/120bps; raise non-GAAP net income by 8%/3%/3%.
Meanwhile, HSBC tweaked its price target from $110 to $115, saying Alibaba is its Asia Super Ten:
We trim our GMV forecast but raise revenue and EPS to reflect higher monetization. For FY2016e/2017e, GMV growth is cut to 26/23% while China retail revenue growth rises to 36/41%. Reflecting higher growth in cloud, we now expect total revenue to grow by 34/39% for FY2016e/FY2017e. We raise our non-GAAP EPS by 6/6% for FY2016e/2017e.
JP Morgan tweaked down its price target from $97 to $93 but only because of the weaker yuan. Alibaba earns money in yuan but reports in dollar. JPMorgan’s revenue estimates are largely unchanged and the bank raised its operating profit estimates on higher margin assumptions.
Alibaba: Nice Take-Rate, Deutsche, HSBC Tweak Up Targets - Asia Stocks to Watch - Barrons.com