Oppenheimer Initiates Coverage On Alibaba

Oppenheimer initiated coverage on Alibaba Group Holding Ltd. BABA Monday with an Outperform rating and $133 price target.  The report was issued as Alibaba headed into a potential $8 billion day of sales.

Analysts Ella Ji and Fiona Zhang noted that “Alibaba claims 58 percent/96 percent of the B2C/C2C ecommerce market in China.

“In addition to its clear leadership in customer base, the company also has an absolute advantage in customer engagement (50 orders per active customer in FY14, vs. 7 for JD, 9/21 for AMZN/eBay, and an average of ~5 for other major e-commerce players in China in 2013).”

Ji observed that the company’s position “not only attests to the superior value that BABA’s platform provides, but also suggests high user stickiness and thus a powerful lever to boost monetization capabilities.”

“We like Alibaba’s ecosystem, as it has a stronger monetization capability than Tencent and Bidu, benefiting from its position as a commerce-oriented platform in the downstream of the retail business cycle. The other two behemoths, in comparison, have dominance in the upstream with heavy traffic, but are still in the process of developing effective ways to turn traffic into revenues,” according to Ji.

The analyst report conclude that Alibaba “is one of the best-positioned companies in the China Internet space by virtue of its strong brand, large and loyal customer base, and compelling network advantage.”

Alibaba Group Holding Ltd. recently traded at $115.76, down 2.85 percent.