RBC Capital Raises Price Target on Alibaba Group Holding Ltd (BABA) Following Q1 Results

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RBC Capital analyst bullish on Alibaba, believes the stock would gain in near future

Alibaba Group Holding Ltd. (NYSE:BABA) impressed the investors by publishing stellar financial results in first quarter of fiscal year 2017. In 1QFY17, the company surpassed the Street expectations on both top line and bottom line by posting remarkable results. The company posted 4.9 RMB (74 cents) in earnings per share against the estimate issued at 4.56 RMB (62 cents).

It grew its revenues by 48.2% year-over-year by reporting 32.15 billion RMB ($4.8 billion) in revenues. The group beat the Street on its revenues as the consensus had expected the company to post $4.6 billion.

As the earnings headed in the right direction, RBC Capital analyst Mark Mahaney reiterated the stock as Outperform. He was impressed as the company beats his expectations of $3.97 billion in revenues. The Chinese retailer also surpassed his expectations on EBITDA by 18.25%. The company’s EPS came in 18.36% higher than what he was looking forward to. Thus, the company successfully restored his confidence in its stock.

The retailer believes that a large part of this growth was due to increased monetization in Mobile and Desktop segment. In this quarter, mobile monetization had exceeded that of desktop monetization, marking the first ever quarter to achieve this result. Mr. Mark has faith that this trend would continue and would help the company in maintaining its premium growth levels. The monetization rates jumped approximately 2.79% compared to 2.49% of the last quarter. The mobile monetization increased by 2.8% whereas the desktop monetization showed an improvement of 2.78%.

Furthermore, the $255.42 billion group has also seen growth in its cloud computing segment. The company expects the growth to accelerate in this segment and looks forward to attain a run rate of $1 billion. The company increased its customers 18% YoY by expanding its services in the core Chinese market. The analyst has high hopes that the China-based company would continue to announce solid margins and high growth in future which would be driven by the initiatives mentioned.

Following this exceptional performance, the firm not only maintained Outperform rating on the stock. RBC Capital analyst Mark Mahaney also raised the price target by 4.76% to $110. He was impressed by the company’s performance across the board. He observed that the revenue growth posted by the company was the highest and fastest in the last seven quarters due to increases in monetization and cloud computing. Based on these, the firm has raised the estimates on the stocks of Alibaba as well as the price target. The analyst also increased his FY17 EBITDA estimate to $11.58 billion.

Not only Mark Mahaney has high expectations from the group. Other analysts are also bullish on the Chinese retailer. Following the exceptional financial results for this quarter, the FactSet Fundamental analysts have revisited their ratings on the stock. They now have 32 Buy, three Overweight, and seven Hold ratings on the stock. The shares of Alibaba show a slight upward potential of 0.82% over the last close as the median price target is set at $99.06.

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