Alibaba GMV Growth, Margins And 2017 Potential Give Stock Upside, Analyst Says

• Alibaba Group Holding Ltd BABA shares have been heading south for about a month, and are down 17 percent since December 28.
• Bernstein’s Carlos Kirjner maintained an Outperform rating for the company, with a price target of $110.
• Kirjner stated that the end of Alibaba’s mobile transition had begun, and expressed confidence in the company’s overall monetization story.

Analyst Carlos Kirjner mentioned that the “key number to watch” for Alibaba continues to be GMV growth. He expressed optimism in the company’s “overall monetization story,” saying that mobile monetization is likely to meet or exceed the historical Web or PC monetization levels.

Kirjner projected F3Q16 GMV to grow by around 27 percent y/y to RMB 996 billion. Other estimates for the quarter at for overall revenues of RMB 33,675 million, 1.5 percent above consensus, EBITDA of RMB 18,074 million, 1.8 percent above consensus, and adjusted EPS of RMB 6.14, about 5 percent above consensus.

The analyst also projected a Web monetization rate of 3.24 percent, reflecting essentially no growth y/y, and mobile monetization of 2.60 percent, up about 65bps y/y. This translates to a blended monetization rate of 2.81 percent, about 10bps higher than F3Q15's 2.70 percent. This reflects the expectation of mobile reach 67 percent of total GMV, as compared to 62 percent in F2Q16 and 42 percent in F3Q15.

“Our blended monetization rate is up 10 bps YoY, in large part because of the continued improvement in mobile monetization and rapid growth of mobile GMV,” Kirjner mentioned.

The concerns around Alibaba’s mobile transition seem to be “fading quickly in the rear-view mirror,” the analyst commented. He further noted, “In addition to the key metrics associated with its Marketplaces, GMV growth and monetization rate(s), we believe further disclosure around Alibaba's cloud business, UC Web, or related to ANT Financial could be important catalysts for the stock.”