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MKM Partners Comments On Alibaba F-1 Filing And The Impact To Yahoo!

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Alibaba is slated to IPO in September on a rumored date of the 16. Ahead of the IPO, MKM Partners, which is not participating in the IPO nor initiating coverage, released a list of observations surround Alibaba’s business metrics.

On August 27, Alibaba filed an amended F-1 with revenues of $15.6 billion versus MKM forecasts of $14.08 billion.

Active buyers on Alibaba’s platform totaled 279 million. The large user base has enabled Alibaba to generate increasing levels of income from mobile.

“The larger upside was driven by a materially better monetization of mobile transactions. Mobile take-rate was 1.49 percent, compared to 0.98 percent in March and 0.58 percent a year ago," MKM writes.

Mobile gross merchandise value increased to 33 percent last quarter from 27 percent in Q1, adding fuel to the thesis that mobile is cannibalizing some desktop transaction volume.

MKM also noted that gross margins fell roughly 400 basis-points year over year, and the Alibaba F-1 attempted to pin this on an issuance of stock-based compensation, following an Alipay re-evaluation.

MKM doesn’t believe this explains the “material delta,” or change in gross margin, as MKM forecasted an SBC nearly in line with Alibaba’s reported number.

Regarding spending, MKM writes “We assume the step up in spending is not one-time, but a sign that [management] will be aggressive investors in growth initiatives.”

The strength in Alibaba is expected to benefit Yahoo! (NASDAQ: YHOO). Cantor Fitzgerald yesterday announced it was maintaining its Buy rating on Yahoo! along with its price target of $39, as the Alibaba F-1 showed that worries over revenue growth deceleration are “off the table for now.”

MKM believes “the BABA total stake may be worth $26-$45 per share to YHOO.”
Shares of Yahoo are trading up as of Thursday mid-day roughly 0.50 percent to $38.38.

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