Alibaba Analysts Stay Bullish After Q3 Print

Chinese e-commerce platform Alibaba Group Holding Ltd BABA reported an earnings beat in its fiscal third quarter Jan. 30, just one day after its home country saw a "day of disaster" for earnings, according to Bloomberg. Here's how the Street reacted.

The Analysts

Bank of America Merrill Lynch's Eddie Leung maintains a Buy rating on Alibaba with a price target lowered from $221 to $215.

UBS' Jerry Liu maintains at Buy, price target lifted from $200 to $210.

Raymond James' Aaron Kessler maintains at Strong Buy, price target lifted from $260 to $285.

Bank Of America: The Details

Alibaba's earnings report showed 41-percent year-over-year revenue growth to RMB117.3 billion, which was 1.7-percent short of consensus estimates due to contra-revenues related to online-to-offline subsidies, Leung said in a note.

By category, Chinese commerce retail revenue including new retail rose 35 percent; international retail rose 23 percent; consumer services revenue was up 3 percent from the prior quarter; and cloud/media/video growth decelerated from 91 percent last quarter to 84 percent.

Overall the earnings report reinforces the bullish case for the stock, which is based on the belief Alibaba will be a key beneficiary from stabilization of China's domestic consumption market and ongoing strategic initiatives that can open up large potential new markets, according to BofA. 

UBS: More Bullish Stance

Unlike prior earnings reports, the Street is likely to move its Alibaba estimates higher due to "slightly better" Chinese commerce retail revenue growth and improved losses from Youku, Liu said in a research report. Alibaba's tone also sounded "more positive," which bodes well, as the analyst is modeling for an acceleration in EBITDA growth from 12.7 percent in fiscal 2019 to 26 percent in fiscal 2020.

Raymond James: 3 Positives Outweigh 2 Negatives

Kessler's shared three main takeaways from Alibaba's earnings report: 

"Solid" marketplace core commerce revenue growth of 27 percent year-over-year and marketplace commerce EBITA growth of 31 percent.

Chinese retail annual active customers rose 23 percent to 636 million, while mobile monthly active users rose 21 percent.

New retail revenue of RMB11.3 billion was 23 percent above estimates.

On the other hand, the earnings report includes two negative data points, the analyst said:

Commission revenue growth slowed from 31 percent last quarter to 24 percent and fell short of expectations due to an accounting change.

Digital media and entertainment suffered from slower advertising revenue growth, which the company said will likely persist through the March-ending quarter.

Price Action

Alibaba shares were down 0.76 percent at $166.70 at the close Monday. 

Related Links:

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3 Catalysts That Make Alibaba A Top Mega-Cap Pick At MKM

Photo courtesy of Alibaba.