Deutsche Bank Revisits Alibaba Margin Assumptions; Still Buying

Alan Hellawell of Deutsche Bank said the Youku acquisition is expected to cause a 4 percentage point drag to Alibaba Group Holding Ltd BABA's EBITDA margin. The analyst also expects margin drag from low margin businesses such as UCweb and AliCloud, and growing investment in digital entertainment.

However, Hellawell maintained his Buy rating on attractive valuation and raised price target to $102 from $91.

The analyst said the e-commerce giant announced gross merchandize value (GMV) through March 21st of RMB3 trillion, extrapolates to March quarter GMV of RMB733 billion. Alibaba also reiterated its fiscal 2020 GMV target of RMB6 trillion, driven by an expansion in rural and cross-border e-commerce.

Shares of Alibaba closed Friday down 0.9 percent at $75.86.