RBC Boosts PT on Alibaba (BABA) to $95; Mobile Monetization Improvements Seen as Sustainable
RBC is raising its price target on Alibaba (NYSE: BABA) from $80 to $95 following Q3 results released earlier in the session. The firm has Alibaba at Outperform.
Analyst Mark Mahaney noted the following focus points and observations from today's report from Alibaba:
- Solid Sept Q Results – Revenue of 22.2B RMB beat our/Street views of 21.1B/21.3B RMB and EBITDA of 11.1B RMB also beat the Street @10.4B. Non-GAAP EPS of 3.63 RMB beat our/Street estimates of 3.22/3.43 RMB. The key delta was China Retail (especially Mobile) and AliCloud (to a smaller extent). China Retail grew an accelerating 35% to 17.3B RMB, 7% above our est., despite Desktop GMV/Revenue coming in light. The most positive data point is that Mobile Monetization continues improving, coming in @2.39% (vs. RBC @2.10%) and closing in rapidly on Desktop Monetization. Higher quality merchants, ad product innovation, and increased ad load are all key, sustainable factors.
- The Keys – 1) Mobile & Desktop Trends– Mobile GMV of 440B RMB handily beat consensus of 414B RMB and monetization continued to demonstrate substantial Y/Y improvement, leading to Mobile Rev. +183% Y/Y to 10.5B RMB. 2) Singles Day Catalyst Ahead- Takes place on Nov 11th and mgmt is prioritizing globalization (core to BABA’s L-T strategy), omni-channel (+180K off-line stores, 330 cities), Mobile and logistics (Suning will support fulfillment). 3) Cloud Computing– Growth accelerated, +128% Y/Y, tho still represents ~3% of rev. 4) Active Users– Active Buyer growth (+25% Y/Y) decelerated, but reached 385MM. 5) Repurchased Shares– ~41M shrs (1.6% of S/O) or $2.7B of $4B announced authorization.
- Increase Ests; PT to $95 – Our FY2017 Revenue increases 8% while EBITDA increases 11% to 136B RMB and 72B RMB, respectively. $95 PT (previously $80) based on average of 24X P/E multiple on our CY17E EPS of $4.09 & 15X EV/EBITDA multiple on our CY17E EBITDA of $14.1B. We believe our outlook for 3-yr 30%ish bottom-line growth supports these multiples.
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