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Here's Why Baird Is Impressed With Alibaba

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Here's Why Baird Is Impressed With Alibaba
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After Alibaba Group Holding Ltd (NYSE: BABA) delivered a beat for the first quarter of fiscal 2018, Baird analysts are recommending investors “add to positions.”

The e-commerce giant reported a Q1 adjusted EPS of $1.17 against a 93-cent estimate and sales of $7.403 billion against a $7.13 billion estimate before the open Thursday.

The company said it has 466 million annual active consumers and 529 million mobile monthly active users, an increase of 22 million year-over-year.

Baird reiterated an Outperform on Alibaba and raised its price target from $170 to $190.

“Alibaba’s scale, consumer data and technological sophistication provides significant competitive advantages that will become even more pronounced going forward, in our view, as AI/personalization technologies are further refined,” analyst Colin Sebastian said in a note.

Alibaba CEO Daniel Zhang said technology is driving growth in the company’s business and strengthening its position beyond core commerce.

“We are excited about the future as we continue to innovate and drive synergies among the businesses throughout the Alibaba ecosystem,” Zhang said in a statement.

Strong Commerce, Mobile Engagement, Free Cash Flow Numbers

Alibaba’s revenue growth was driven by “continued strength” in core commerce, up 58 percent year-over-year, and mobile engagement that increased 24 percent year-over-year, Sebastian said.

The company’s cloud services segment was up 96 percent year-over-year, the analyst said.

“Core commerce outperformance was driven by ‘robust’ growth in spend per merchant and historic highs in number of paying merchants.”

Free cash flow generation at Alibaba amounted to 44 percent of revenue in Q1, Sebastian said.

The Baird analyst projected that reinvested profits “will continue to drive segment revenue growth at or above the consolidated [fiscal 2018] guidance range of 45-49 percent” and provide capital for Alibaba’s growth initiatives.

International Expansion

Alibaba’s international business grew 136 percent year-over-year as a result of the factory-direct marketplace AliExpress and the acquisition of Lazada, Sebastian said. Alibaba announced in July it was investing $1 billion in the southeast Asian retailer.

Benzinga reported last month that Alibaba was launching an online network to pair businesses with merchants on the Taobao marketplace.

The Taobao Global U.S. Merchants Network will link small- and medium-sized businesses in the U.S. with the sales potential of the more than 500 million consumers who use Alibaba’s platforms, according to the company.

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Latest Ratings for BABA

DateFirmActionFromTo
Dec 2017SusquehannaInitiates Coverage OnPositive
Nov 2017OppenheimerMaintainsOutperform
Nov 2017BairdMaintainsOutperform

View More Analyst Ratings for BABA
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