Bernstein Initiates Alibaba With $120 PT On Mobile Monetization Growth
In a report published Thursday, Bernstein analysts initiated coverage of Alibaba Group Holding Ltd (NYSE: BABA) with an Outperform rating and $120 price target. The analysts believe that the market underappreciates the company's growth potential.
Alibaba has potential to grow its gross merchandise volume (GMV) in its Chinese retail markets, Taobao and Tmall. The company also has the potential to fully monetize this GMV as mobile takes over a leading share of these volumes. The analysts believe that improvements in mobile monetization could match or even surpass the historical PC monetization levels.
"Chinese e-commerce continues to penetrate its still-rapidly growing addressable market, which in turn is driven by growing incomes and consumption and expanding Internet penetration. This addressable market is much larger than the consumption of goods by Chinese consumers, as it encompasses a large portion of services they purchase, giving Alibaba a long runway for growth," the report explained.
According to the Bernstein report, the markets are also underestimating Alibaba's potential to expand its margins in the near term, driven by GMV monetization and a slowdown in headcount growth.
"Although the near-term may be volatile as the transition from PC to mobile occurs, and PC monetization weakens, we believe continued GMV growth and significantly improved (mobile) monetization will drive upside versus expectations 12 months out and beyond," the analysts added.
Shares of Alibaba closed Wednesday at $90.70.
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