Market Overview

Alibaba's 'New Retail' Strategy Turns This Analyst Incrementally Bullish

Alibaba's 'New Retail' Strategy Turns This Analyst Incrementally Bullish

Alibaba Group Holding Ltd (NYSE: BABA)'s fiscal fourth-quarter earnings report reinforces the case for being bullish on the stock, according to KeyBanc.

The Analyst

KeyBanc Capital Markets' Hans Chung maintains an Overweight rating on Alibaba with a price target lifted from $219 to $235.

The Thesis

Alibaba's "new retail" strategy was communicated to investors in 2016 with the intention of providing a seamless engagement between the online and offline universe. The company's latest earnings showed that the strategy is now "getting off the ground," Chung said in a research note. Specifically, revenue from "new retail" in the quarter came in at ¥5.8 billion, which was "well above" the ¥4.1 billion the analyst was modeling.

Strength in "new retail" was driven by store expansion on Hema Supermarket and Tmall Import and the momentum is expected to continue throughout fiscal 2019, Chung wrote. Alibaba's management is guiding its fiscal 2019 revenue to grow by more than 60 percent to ¥365 billion, but investors could expect "big upside" versus guidance as the analyst is estimating "new retail" sales will rise by 175 percent year-over-year to ¥43 billion and account for 11 percent of all sales.

The analyst's price target is based on changes to the financial model after the company's strong earnings report and encouraging guidance.

Price Action

Shares of Alibaba were trading higher by 3.9 percent at $196.29 early Monday afternoon.

Related Links:

Alibaba's Q4 Print: What You Need To Know

Xiaomi's Hong Kong IPO Filing Is The World's Largest Since Alibaba

Image credit: Andy Mitchell, Flickr


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