Market Overview

Stifel Adds Alibaba To Select List, Sees 40% Upside Potential

Share:
Stifel Adds Alibaba To Select List, Sees 40% Upside Potential

Notwithstanding the recent sell-off in Alibaba Group Holding Ltd (NYSE: BABA), its shares represent an opportunity for long-term investors, according to Stifel. 

The Analyst

Analyst Scott Devitt maintained a Buy rating on Alibaba with a $220 price target for Alibaba shares. Stifel also added Alibaba to its Select List. 

The Thesis

Alibaba shares have declined about 12 percent since it reported fiscal fourth-quarter results, dragged by trade war concerns, an Altaba Inc (NASDAQ: AABA) sell event and concerns over investment in growth, Devitt said in a Thursday note. (See his track record here.) 

This is despite Alibaba reporting solid results, with customer management and commission revenue accelerating due to incremental monetization and accelerating physical goods transaction growth, the analyst said. 

The e-commerce platform's slightly below-consensus 2020 guidance is "appropriately conservative" given the uncertain macro backdrop, Devitt said, adding that he sees scope for outperformance.

Alibaba's level of EBITDA margin compression should ease in 2020, the analyst said. 

Cross-border business between the U.S. and China accounts for a smaller component of Alibaba's revenues, Devitt said. Long-term secular trends such as a growing middle class and the economy shifting toward services favor the company's long-term growth trajectory, he said. 

"Overall, we continue to like Alibaba as a leading global eCommerce company that holds a dominant market share in China online shopping and operates an efficient, commission / advertising model in its core marketplace businesses, Tmall and Taobao." 

The firm sees the recent pullback as creating an opportunity to own shares with a long-term investment horizon.

Kinahan: 'You're Buying Risk' 

JJ Kinahan, chief market strategist at TD Ameritrade, told Benzinga that investors should exercise caution with Chinese internet stocks. 

"You know what you're buying; you're buying risk. if you go into these names, you're going to have to have more risk tolerance to the downside," Kinahan said. 

"It's just like buying companies during litigation. There is an extra element of risk and you have to take that into account."

The Price Action

Alibaba shares were down 0.64 percent at $155 at the time of publication Friday. 

Related Links:

KeyBanc Likes Alibaba's Alimama, Sees Upside Potential

Dan Nathan Sees Unusual Options Activity In Alibaba

Photo courtesy of Alibaba. 

Latest Ratings for BABA

DateFirmActionFromTo
Sep 2019ReiteratesBuy
Aug 2019MaintainsOverweight
Aug 2019Initiates Coverage OnBuy

View More Analyst Ratings for BABA
View the Latest Analyst Ratings

Posted-In: Scott Devitt StifelAnalyst Color Price Target Reiteration Analyst Ratings Best of Benzinga

 

Related Articles (BABA + AABA)

View Comments and Join the Discussion!

Latest Ratings

StockFirmActionPT
WENMorgan StanleyMaintains22.0
JAZZBernsteinReinstates150.0
XGNCantor FitzgeraldInitiates Coverage On18.0
LOOPRoth CapitalInitiates Coverage On14.0
SNABairdMaintains165.0
View the Latest Analytics Ratings
Don't Miss Any Updates!
News Directly in Your Inbox
Subscribe to:
Benzinga Trading Daily
Get pre-market outlook, mid-day update and after-market roundup emails in your inbox.
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Daily Analyst Rating
A summary of each day’s top rating changes from sell-side analysts on the street.
Thank You

Thank you for subscribing! If you have any questions feel free to call us at 1-877-440-ZING or email us at vipaccounts@benzinga.com

Cannabis Stock Gainers and Losers From May 24

'Compelling Asset': Splunk Analysts Bullish After Software Company's Q1, But Investors Pull Back