Here's Why Alibaba Remains A Top Pick At Stifel

Analysts at Stifel met with Alibaba Group Holding Ltd BABA's head of investor relations Rob Lin to discuss the company's 51-percent ownership stake in the logistics provider Cainiao. The firm's Scott Devitt maintains a Buy on Alibaba's stock with an unchanged $190 price target.

Alibaba announced on Thursday it now holds a majority stake in Cainiao and plans to invest $15 billion in global logistics, Devitt said in a note. (See Devitt's track record here.) Alibaba will also control Cainiao's board by holding four of the seven seats, and this will help the Chinese ecommerce behemoth create synergies as "frictions are removed," Devitt said. Cainiao previously negotiated logistics costs with each Tmall business — a distraction, according to Stifel. 

Bringing the two China-based companies closer together will also improve the value proposition for merchants and consumers, as it will generate improved shipping and warehouse efficiency, lower merchant logistic costs, and of course give consumers quicker delivery options, according to Stifel. 

Perhaps most important, the acquisition will better position Alibaba to capitalize on mega-large events, Devitt said. During Alibaba's "Singles' Day" it will be able to warehouse 100 percent of its merchants' products as opposed to outsourcing to multiple distributors.

"Management believes a logistics buildout is crucial to maintaining and ultimately building market share over the long term," the analyst said.

"Providing Cainiao with additional capital will allow the logistics provider to accelerate the infrastructure build out."

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Alibaba Executive Chairman Jack Ma. Photo by Dustin Blitchok.