MKM Bullish On BABA

According to a new report, the latest data from a MKM Partners Chinese eCommerce study supports the firm’s bullish stance on Alibaba Group Holding Ltd BABA. MKM analyst Rob Sanderson believes that the latest data indicates the powerful growth outlook for eCommerce in China.

The numbers
More than 70 percent of the 1,000 online shoppers surveyed in the study indicated that they intend to spend more money shopping online in the next 12 months versus fewer than 1 percent that indicate they intend to spend less.

Based on the preferences of respondents, Alibaba currently has about 67 percent of the market share in the space, with competitor JD.com Inc JD coming in a distant second with only about 15 percent share.

The survey indicates that 47 percent of eCommerce spending in China will be done on mobile devices in the next year versus only 39 percent during the past year.

Direct sellers gaining favorability?
Nearly 61 percent of those surveyed prefer the online marketplace model compared to only 23 percent that prefer direct sellers.

Some investors argue that JD’s gross merchandise volume (GMV) growth of 99 percent year-over-year in March is an indication of a growing preference among Chinese consumers for direct sellers. However, MKM disagrees, explaining that JD’s direct seller business and Alibaba’s Tmall share nearly identical GMV growth rates.

Bullish on BABA
MKM believes that Alibaba is a great investment opportunity at current price levels. “We think BABA is one of the very best secular growth stories available to large cap investors today,” Sanderson explains.

MKM has a Buy rating on Alibaba and a $115 target for the stock.