Alibaba Wants To Be Bigger Than Apple And Google...Combined

MKM Partners analyst Rob Sanderson likes Alibaba Group Holding Ltd BABA on the heels of analyst day. The brokerage reiterated its Buy rating with a price objective of $95.

In a research note, the analyst thinks "The company will increase transparency with new reporting segments beginning next quarter and provided annual guidance for the first time, above expectations and with acceleration in revenue growth. We are updating our model to embed YouKu and Lazada, forecasting about $1.8Bn in revenue contribution and 360bps dilution to margin this year."

The brokerage pointed out that management has a target to become the world's fifth-biggest economy in 20 years. Their goal is to one day exceed the size of Apple Inc. AAPL and Alphabet Inc GOOG's Google, put together.

Related Link: 12 Questions For Alibaba's First-Ever Analyst Day

Sanderson reviewed a number of outlandishly bold predictions from his first in-person encounter with Jack Ma over 10 years ago. The interesting point is that nearly all of them came true, according to the analyst. He also believes Alibaba has undoubtedly been able to execute against an enormous vision and create tremendous value.

MKM Partners thinks management believes five infrastructure elements, crucial for growing a massive digital economy, are commerce, logistics, payments and finance, cloud and data and cross-border.

"We continue to be impressed by BABA's dominant ecosystem and mgmt's ability to execute on long-term goals. We are not changing our $95 price target at this time, but will likely look to a sum-of-parts valuation as new reporting disclosures are made available next quarter," the analyst concluded.