How Singles Day Is Worth $12 Billion To Alibaba

• The share price of Alibaba Group Holding Ltd BABA has appreciated 23.5 percent over the last month, reaching a high of $85.98 on November 5.
• Robert S. Peck of SunTrust Robinson Humphrey has maintained a Buy rating on the company, with a price target of $100.
• Following the performance on “Singles Day” in 2009, Peck expects the company to generate $13 billion in gross merchandize volume for this Singles Day, scheduled for November 11.

Analyst Bob Peck mentioned that the company generated sales worth $9.3 billion for Singles Day 2014, as compare to total U.S. sales of $2.7 billion on Cyber Monday.

“We project Alibaba could generate ~$12B in GMV this year with >300M packages being delivered. This is in comparison to Amazon’s inaugural “Prime Day” July 15, which accounted for 34M ordered items and an est. ~$2B in sales,” Peck stated.

Related Link: Jim Chanos: I'm Shorting Alibaba, Going Long JD.com

If Alibaba does succeed in generating $12 billion, it would represent GMV growth of 29 percent year-on-year, in-line with the 28 percent GMV growth reported for the last quarter.

“Alibaba has placed a larger emphasis on selling internationally this year with over 5,000 overseas brands in 25 countries participating. We think our estimates for 4Q GMV and revenues of ~$156.3B and ~$5.3B remain achievable,” according to the SunTrust report.

However, the company’s logistics partner, Cainiao, would need to coordinate 10 times its average daily volume of packages, over a larger geography, as compared to prior Singles Days. Cainiao is to coordinate with 3,000 logistic service providers globally to make sure that the influx of orders can be handled effectively.

On the other hand, “a recent outbreak of parcel bombings in China has caused the government to tighten mail security which could cause a disruption in Cainiao’s 11/11 preparation,” Peck added.