RBC Capital Trims PT, Estimates on Alibaba (BABA) Management Commentary

RBC Capital analyst Mark Mahaney lowered estimates and his price target on Alibaba (NYSE: BABA) to $105.00 (from $110.00), but retained an Outperform rating following management commentary.

Mahaney commented, "At an investor conference last week in Beijing, BABA management made two comments indicating incremental adjustments to the business model: 1) the company suspended its online lottery sales in late February, with the June quarter being the first quarter where the company will experience a full quarter impact. In FY15, lottery revenue represented 2% of total revenue (and GMV), and lottery revenue amounted to $500M RMB last June (F1Q15). 2) Alibaba lowered its fixed advertising fee and commission charge on Juhuasuan, the company's group-buying website. The company made this change in early April, so it will experience nearly a full quarter impact this June. BABA made this adjustment to extend its market leadership and attract and retain more advertisers. We assume competitive pressures were also at play….they usually are when companies reduce fees."

To reflect the suspension of the Online Lottery, the firm has reduced June Quarter Mobile GMV by approx. 5% and June Quarter Mobile Revenue by approx. 10% (as Online Lottery had higher than company average take rates). To update for the reduced fee structure on the group-buying platform, they lowered the FY16 Mobile and Desktop take-rates by approx. 0.1%, such that FY16 take-rates went from 2.44% to 2.34%. FY16 GMV estimates were reduced by 3% (to 3.3T RMB), Revenue by 6% (to 101B RMB), and EPS by 2% (to 15.77 RMB).

For an analyst ratings summary and ratings history on Alibaba click here. For more ratings news on Alibaba click here.

Shares of Alibaba closed at $88.29 yesterday.

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