Nomura initiated coverage on Alibaba Group Holding Ltd. BABA with a Buy rating and price target of $120 on Wednesday.
Analyst Chao Wang liked the company because “Alibaba’s main underlying industry, the China eCommerce market (32 percent CAGR over FY14-17F), is positioned for superior growth and as a layer on top of eCommerce merchants, Alibaba enjoys a higher margin of safety owing to its dominant position and bargaining power over merchants.”
“Its new initiatives in finance and media offer significant optionality. We expect Ant Financial to show a 65 percent net profit CAGR over FY14-18F to reach CNY21.4bn and its valuation to hit $106bn in FY18F. Assuming a liquidation event in FY17, we derive an option value for the business of $32bn, or $13/share,” according to the report.
The price target was based on a SOTP analysis implying a 38x blended FY16F P/E.
Alibaba Group Holding Ltd. recently traded at $97.31, down 2.38 percent.
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