Why Morgan Stanley Considers Alibaba To Be 'MVP'
- Alibaba Group Holding Ltd (NYSE: BABA) shares have plunged 34 percent year-to-date, and are currently trading significantly lower than their 52-week high of $120.
- Morgan Stanley’s Robert Lin maintained an Overweight rating for the company, while reducing the price target from $100.70 to $99.50.
- Lin believes that company is the Most Valuable Platform within BAT, given its core segment strength, new business prospects, FCF flow generation and relative value.
Analyst Robert Lin said that Alibaba generated free cash flows of Rmb$48bn in FY15, higher than the combined FCF generated by Tencent and Baidu. Alibaba's core online commerce business has a 78 percent market share and its adjusted EBITDA margin “remains resilient” at 55-58 percent. “We expect Alibaba's margin resiliency to fare better baring acquisitions,” Lin added.
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Lin believes that, over the next three to five years, Alibaba would be more than a strong eCommerce company in China. “Alibaba wants to marry both forms of O2O (i.e. LBS and omni-channel) via partnerships to integrate the entire transaction value chain that include search, payment, product digitization, supply chain and logistics in a large closed loop ecosystem.”
This vision is ahead of its China peers, the analyst said, adding that data connectivity online and offline via its leading cloud infrastructure will be Alibaba’s “key competitive advantage.”
In the report Morgan Stanley noted that mobile monetization is expected to exceed PC's this quarter, driven by higher ad volume growth and rising commission rate. “Marginal positive impacts from mobile ad load increases since May and lack of personalized advertising present ample upside to mobile take rate, which will likely beat Street expectation.”
The price target has been reduced to reflect the assumption of an 11 percent RMB devaluation by 2016.
Latest Ratings for BABA
|Sep 2016||Deutsche Bank||Maintains||Buy|
|Sep 2016||Daiwa Capital||Maintains||Buy|
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