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Investors Look To Alibaba's Upcoming Investor Day After Q4 Bottom-Line Miss

Investors Look To Alibaba's Upcoming Investor Day After Q4 Bottom-Line Miss
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Following Alibaba Group Holding Ltd (NYSE: BABA) fiscal year fourth-quarter results, Baird said the attention now turns to its upcoming Investor Day scheduled for June 8.

The firm noted that the management suggested on the call that it would introduce its 2018 guidance at the Investor Day. The firm also expects further details around the company's brand marketing efforts and a strong focus on the Cloud computing segment.

Q4 Review

Analyst Colin Sebastian attributed Alibaba's top-line outperformance to its ongoing core commerce strength. The analyst termed the result as solid, driven by an acceleration in core commerce, which rose 47 percent, and growth in Cloud computing, which was up 102 percent.

Additionally, the analyst said investments in digital media and entertainment also helped.

The analyst clarified that the acquisition of Youku Tudou, which closed in the fiscal year first quarter, was responsible for digital media/entertainment segment's growth coming in at a solid 234 percent. Even as adjusted EBITDA exceeded the consensus estimates, the analyst noted there was a slight miss on the bottom line.

Key Focus Areas

Baird singled out Cloud computing, globalization and digital media as key focus areas. The firm expects Alibaba's growth to be driven by the core China marketplaces, although additional contributions are expected from international opportunities and emerging businesses.

Promising Mobile Engagement Trends

The firm noted that mobile MAUs rose to 507 million from 493 million in the third quarter, with mobile accounting for 90 percent of China retail commerce revenues. The firm believes strong growth in mobile user engagement remains an integral piece in bridging the gap between online and in-store commerce, as the company continues to invest in offline retail.

"The company continues to leverage core commerce profitability (59 percent EBITDA margin) to drive investments in key growth areas, and management anticipates significant synergies moving forward as its cloud and digital media businesses grow and mature," Baird said.

Baird maintains its Outperform rating on the shares of Alibaba and raised its price target to $135.

At time of writing, shares of Alibaba were 3.27 percent higher at $125.24.

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Image Credit: By Thomas LOMBARD, designed by HASSELL (architects)[1] (Own work) [CC BY-SA 3.0 (], via Wikimedia Commons

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