Credit Suisse Raises Target On Alibaba To $100

Alibaba Group Holding Ltd BABA reported its CY 1Q16 results, with the revenue beating the consensus and the estimate.

Credit Suisse’s Dick Wei maintains an Outperform rating on the company, while raising the price target from $96 to $100.

1Q Results

Wei mentioned that the revenue beat was primarily driven by robust GMV growth and higher cloud computing revenue.

The non-GAAP EPS for the quarter was largely in line with the estimate, although it missed the consensus due to equity investee losses.

China retail GMV growth re-accelerated to 24 percent year-on-year, while the take rate improved, leading to 41 percent revenue growth in China retail.

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Wei expressed optimism regarding increased business visibility, while stating that “cloud computing revenue continues to surprise on the upside.”

Pros & Cons

The analyst, however, also expressed concern regarding the share results of equity investees adversely impacting net income, and the GMV of Tmall, as a percentage of the total GMV, declining quarter-on-quarter.

Wei believes that Alibaba’s Cloud Computing segment was “likely to see leverage starting this year with revenue scale,” with cloud revenue reaching close to $800 million in FY17.

The company expects operating cash flow to offset investments during 2016.