Deutsche Maintains Alibaba As A Top Pick, Lifts Price Target To $115

Alibaba Group Holding Ltd BABA reported strong June quarter results, with the revenue and adjusted EBITDA beating the estimates.

Deutsche Bank’s Alan Hellawell maintained a Buy rating on the company, while raising the price target from $107 to $115.

Maintaining Alibaba as a Top Pick, Hellawell mentioned that total revenue and China retail revenue posted their highest growth since the IPO, driven primarily by higher spend of brands, growth in Cloud, improved UCWeb monetization and Youku consolidation.

While mobile surpassed PC monetization for the first time, core ecommerce generated margin of 61 percent, while Cloud and UCWeb losses narrowed, driven largely by synergies among segments.

Strong Results

Total GMV was up 24 percent year-on-year to RMB 837 billion, while total revenue jumped 59 percent to RMB 32.2 billion.

Organic revenue growth came in at a robust 47 percent year-on-year, primarily driven by outperformance of China retail sales.

Cloud grew 153 percent year on year and is now close to breakeven. Adjusted EBITDA margins stood at 46.5 percent, ahead of the estimated amount.

“We envision a 1 percent impact on China retail revenue from Sep 1st given the new P4P ad taxes,” Hellawell stated.

The FY17, FY18 and FY19 revenue estimates have been raised to reflect improved growth, while the non-GAAP EBITDA margin estimates have also been raised.

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