RBC's Mark Mahaney Expresses Skepticism Regarding Alibaba's Retail Success Outside China

Alibaba Group Holding Ltd BABA came out with better-than-expected earnings on Thursday. Mobile transactions increased 27 percent year-over-year, while revenue for the company jumped 45 percent year-over-year to $2.81 billion.

Mark Mahaney from RBC Capital Markets was on CNBC following Alibaba's earnings to weigh in on the numbers and to discuss how the company can grow from here.

Mobile Monetization

"Last quarter [...] there was a lot of concern over the mobile monetization levels," Mahaney said. "And obviously the Chinese market, like all e-commerce markets, is shifting from desktop to mobile and the monetization rates were declining year-over-year."

Mahaney continued, "That reversed this quarter, and the company seems to be very confident that they can continue to rise mobile monetization levels. So, big issue number one, which caused the biggest underperformer year-to-date, has been reversed."

Related Link: Alibaba Rallies Off Earnings Beat: A Technical Look

Multiples

On whether Alibaba is properly valued, Mahaney said, "The multiples we are doing – depending on where the numbers shake out, maybe 30, 35 P/E on this kind of stock on next year's numbers. Given top-line and bottom-line growth, that's kind of in that same neighborhood, we think the valuation here is eminently justifiable."

Doubts Outside China

Mahaney expressed that for Alibaba to grow revenues, "Either it needs to generate other revenue streams within China, like cloud computing – which is a major new initiative by the company or has been for the last few years – or retail success outside of China.

"We are relatively skeptical that they can do it outside of China."

Limited Chances

"They are probably going to have to do it through investments, and they are making a few – some of which have been publicized.

"But, to do kind of a full direct approach into the U.S. and Europe, the chances of that are probably pretty limited," Mahaney concluded.