Morgan Stanley Highlights Expectation For Robust Revenue Growth From Alibaba

Alibaba Group Holding Ltd BABA is likely to report strong revenue growth for F1Q17, driven by GMV, improving monetization and AliCloud growth, Morgan Stanley’s Robert Lin said in a report. He maintained an Overweight rating on the company, with a price target of $130.60.

GMV Growth

Analyst Robert Lin mentioned that Alibaba is likely to have generated resilient GMV growth of 22 percent y/y in F1Q17. GMV is estimated to reach Rmb821 billion.

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Improved Monetization And AliCloud

Lin expects Alibaba to have achieved a higher monetization rate in its core ecommerce business as well as faster growth in its cloud business. Total revenue is estimated at Rmb30.3 billion, representing 50 percent y/y growth.

Excluding acquisitions of Youku Tudou Inc YOKU and Lazada, revenue is estimated at Rmb27 billion, representing 35 percent y/y growth. The analyst expects revenue growth to have been driven by:

• China retail marketplace revenue growth of 33 percent y/y to Rmb21.0 billion, “faster than GMV growth with blended monetization rate up 22bps yoy to 2.55%”
• Alicloud revenue growth of 176 percent y/y to Rmb1.3bn, “holding up well vs 175% yoy in F4Q16 given the growing paying customer base, new product launches and increased adoption of more value-added services”

With 500k paying customers as of March 2016, AliCloud is becoming a growth driver, Lin stated, while adding that AliCloud is expected to record revenue of Rmb7.2 billion, representing 140 percent y/y growth, and be “slightly profitable” in FY17.

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