MKM Says Alibaba Monetization Concerns Are 'Overblown'

In a report published Tuesday, MKM Partners analyst Rob Sanderson commented on Alibaba Group Holding Ltd BABA's March quarter results which were "much better than feared" despite an "aggressive" shift to mobile. "We believe the stock should continue higher in the near-term," Sanderson wrote. "Monetization concern that had contributed to pressure heading into the earnings report was misplaced." Sanderson continued that Alibaba's adoption of mobile commerce is a "significant" long-term positive for the company that will drive user and gross merchandise volume (GMV) growth, while monetization continues to close the gap with desktop. The analyst noted that the company's mobile outlook is to be expected following the quarterly print in which mobile metrics were "exceptional." Monthly mobile users grew 77 percent to 289 million – a figure that is equal to the entire Internet user population in the U.S. Moreover, mobile drove the majority of transaction volume last quarter, with mobile GMV growing by 157 percent. Sanderson also added that mobile is important because it drives user growth and enables more transaction opportunities, use cases and avenues to serve more categories of retail. Alibaba's expansion to new categories is also a positive, Sanderson argued. New retail categories beyond the "more active" clothing, electronics and household goods categories is a "strategic imperative" and "key to the Bull case." Bottom line, Alibaba is a "must-own" stock for growth managers as near-term monetization concerns appear to have been "misplaced" and the lock-up expiration has not caused a "significant supply" shock for the stock. Shares remain Buy rated with an unchanged $115 price target.