Alibaba Group Holding Ltd – ADR BABA shares are trading at record highs, and one analyst is of the view the stock still offers a buying opportunity.
The Alibaba Analyst: Needham's Vincent Yu initiated coverage of Alibaba with a Buy rating and $275 price target. The stock is also added to Needham's "Conviction List."
The Alibaba Thesis: Alibaba, which owns Taobao and Tmall, will remain the No. 1 player in the e-commerce market as it strengthens efforts to attract customers from lower-tier cities, Yu said in a Thursday note.
- The analyst expects the company's Juhuasuan and Taobao Deals, which provide value-for-money products and target consumers in lower-tier cities, to drive user and gross merchandise value growth in the near term.
- The analyst believes Alibaba's Taobao Live is the "best-in-class" e-commerce live-streaming platform on the market, as e-commerce live-streaming gains popularity. Taobao Live's industry-leading market position and highly efficient supply chain helped grow GMV over 100% in the fiscal year 2020, he noted.
- Alibaba's Ele.me and Koubei food delivery platform will remain the second-largest player in the local services market, the analyst said. The company is trying to leverage in-app traffic of Alipay, and explore opportunities in lower-tier cities.
- Yu sees the company's cloud platform – AliCloud – as an upside driver for top-line and margin expansion.
"We think Alicloud, as the market leader in China (~46% market share), is benefiting from the shift away from traditional IT infrastructure toward the Cloud by enterprises and government agencies," Yu wrote in the note.
Needham said the company's strengths are likely to serve as crucial competitive barriers to newer market entrants, such as Pinduoduo Inc – ADR PDD, which over the past two years has aggressively used subsidies to pursue customers.
BABA Price Action: At last check, Alibaba shares were up 1.08% to $260.42.
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