"In our view, accelerating core e-commerce revenue growth and the top-of-the-class positioning of its cloud and media businesses, along with increasing financial transparency, should convince investors to look beyond the 'cyclical' perception of Alibaba," analyst John Choi wrote in a note.
"We believe the market has started to appreciate Alibaba's efforts to enhance the information density of its mobile Taobao app (ie, enriched digital media content)," Choi continued.
The analyst said the company's online market business should benefit from higher mobile search ad loads, increased engagement levels and yet to monetize new social/digital content.
Further, Choi expects Alibaba's operating margin to be pressured near-term from promotional efforts at Tmall Supermarket.
Meanwhile, the analyst's SOTP analysis shows reasonable core business valuation and believes the current share price values Alibaba's core e-commerce segment at 21x 12-month forward EV/EBITA.
"This looks attractive to us as its global large-cap internet peers are trading at 15–25x 12-month forward EV/EBITDA (23x for Amazon.com, Inc. AMZN, 24x for Tencent and 18x for Facebook Inc FB), on Bloomberg consensus forecasts," Choi added.
Shares of Alibaba were down 0.69 percent at $107.51 at time of publication.
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