Market Overview

KeyBanc Likes Alibaba's Alimama, Sees Upside Potential

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KeyBanc Likes Alibaba's Alimama, Sees Upside Potential

Alibaba Group Holding Ltd (NYSE: BABA) is up 37 percent in 2019, but one analyst still claims upside potential.

The Rating

KeyBanc Capital Markets analyst Hans Chung maintained an Overweight rating on the stock but raised his price target from $210 to $240.

The Thesis

Chung expects Alibaba to remain a “leader and pioneer” in e-commerce, particularly as it develops Alimama. (See the analyst's track record here.) 

The platform recently opened registration for merchants to test a “Super Recommendation” marketing feed, which was previously accessible by invite only. KeyBanc interprets the expansion as a sign of positive ROI and forecasts an official launch by the second half of 2020.

“We expect feed monetization to be meaningfully incremental to the model as recommendation feed traffic has been larger than search,” Chung wrote in a note. He expects revenue in the third quarter of 2020.

The analyst also anticipates margin improvement as Freshippo stores ramp and mature through 2020. “We estimate operating margin of Freshippo to improve from a low-teens percentage loss in F2Q19 to negative low single digits by F4Q20,” he wrote.

Price Action

At time of publication, Alibaba shares traded down 2.9 percent at a rate of $182.80. The stock has been under pressure this week amid trade war concerns.

Related Links:

This Analyst Loves Alibaba's 'Super App'

Office Depot Partners With Alibaba To Empower Small Businesses Online

Photo courtesy of Alibaba.

Latest Ratings for BABA

DateFirmActionFromTo
Aug 2019MaintainsOverweight
Aug 2019Initiates Coverage OnBuy
Jun 2019Initiates Coverage OnBuy

View More Analyst Ratings for BABA
View the Latest Analyst Ratings

Posted-In: Alimama Hans Chung KeyBanc Capital MarketsAnalyst Color Price Target Reiteration Analyst Ratings Best of Benzinga

 

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