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JPMorgan’s Doug Anmuth expects the improving take rate at Alibaba Group Holding Ltd (NYSE: BABA) “to drive sustainable top line growth momentum, despite continued macro headwind on GMV growth.”

The analyst maintained an Overweight rating on the company, with a price target of $88.

According to the JPMorgan report, “With the ongoing GMV and Revenue Decoupling becoming better understood, we believe attention will turn to FY17 margins and profitability as the core business margin stability works to offset investments in emerging businesses.”

What To Expect Going Into FY17

Anmuth mentioned that Alibaba Group reported China retail GMV growth of 20 percent year-on-year for the December quarter.

For 4QFY16, GMV growth is expected largely in line with the estimates, although it might be pressured into FY17 due to macro headwinds, ongoing quality clean up and the “law of large numbers,” the analyst said.

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Total revenue growth is expected at 30 percent year-on-year, primarily driven by 31 percent year-on-year growth in China retail revenue, which in turn was due to continue take rate improvement.

Anmuth believes that there could be downside risk to the FY17 consensus EPS expectations, since the forecasts do not seem to complete account for the Koubei subsidy and the Youku consolidation.

Other Expectations

Anmuth also expects management to comment on “rising KoL economy in China and its implication/impact to BABA,” while providing updates on the company’s new business development strategy and greater insight into profitability in FY17.

Latest Ratings for BABA

Jan 2017BernsteinInitiates Coverage OnOutperform
Jan 2017Standpoint ResearchUpgradesHoldAccumulate
Nov 2016JefferiesMaintainsBuy

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