Alibaba's (BABA) Price Target Boosted to $110 at Deutsche Bank
Deutsche Bank maintained a Buy rating on Alibaba (NYSE: BABA) and a modified price target of $110.00 (prior $109.00). Comments follow the release of strong Q1 results. Analyst Alan Hellawell said concerns about margin were misplaced, and he called cloud expansion "encouraging."
"Alibaba delivered a solid March quarter with total GMV of RMB742bn, in line with DBe. Blended take-rate improved to 2.47%, 8bps higher than DBe, mainly driven by a continued rise in mobile take-rate. Mobile GMV continued to rise, to 73% of total GMV. Total revenue reached RMB24.2bn, surpassing DBe by 3%. Non-GAAP income came in at RMB7.6bn, 4% ahead of DBe. We are encouraged by Cloud business growth of 175% YoY (vs DBe of 128%) to RMB1bn. Koubei GMV reached RMB21bn (+32% QoQ). We were relieved to hear that O2O subsidies are unlikely to rise. We meanwhile expect to see expanded disclosure around annual revenue guidance, and added clarity on Cainiao and other invested businesses starting from next quarter," said Hellawell.
Discussing cloud expansion, the analyst said, " Management now describes AliCloud as one of the largest cloud computing businesses in the world. The division claimed a cumulative 500,000 paying customers in the quarter, more than double year-ago levels; AliCloud covers verticals ranging from financials, to healthcare and game developers. Management claimed that AliCloud is approaching break-even, and expects further strong operating leverage going forward. We expect a continuing increase in paying customers and improvement in Cloud products and services to drive triple digit growth in FY17."
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Shares of Alibaba closed at $75.82 yesterday.