Macquarie Initiates Coverage On Alibaba Group Holding Ltd

On Wednesday, analysts at Macquarie Research initiated coverage on shares of Alibaba Group Holding Ltd. BABA with a Neutral rating and $88 price target.

Jiong Shao stated, “With shares already trading at 25 times calendar year 2016 EPS, we prefer to wait for a better entry point.”

Although Shao feels the shares are accurately valued, he expects strong growth to continue and forecasts 37 percent revenue CAGR and 25 percent EPS CAGR for the next three years.

“The most fundamental driver for such significant and long-lasting growth is the lack of an entrenched brick-and-mortar retail network in China.”

On the other hand, Shao wrote, “the biggest mobile franchise in China, Tencent's WeChat business, could possibly jump into the mobile ecommerce foray at some point, thus, market share for Alibaba in ecommerce will be something the company needs to try extra hard to hold on to in the face of potential competition.”

Lastly, Shao feels that any upside in shares of Alibaba with not be derived from the e-commerce side of the business as the company’s revenues are nearly entirely from this division of the business.

Shares of Alibaba closed Wednesday session at $88.30 up 0.72 percent.