Alibaba’s (BABA) e-commerce growth might be slowing down a touch, but the trend has done nothing to dampen Oppenheimer analyst Jason Helfstein’s enthusiasm for all things BABA.
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The latest NBS (National Bureau of Statistics) data points to e-commerce growth decelerating in August and September to 17% and 12% year-over-year, respectively. In contrast, July sales were up by 25% from the same period last year.
However, Helfstein believes, “the slowdown is due to COVID-19-related pull-forward into the June qtr.”
In addition, Helfstein believes Alibaba has enough positive developments to negate the slowdown,
The analyst highlights the new version of Taobao (launched in Sept.) “has improved user experience and engagement, thus unlocking new monetization opportunities.”
Add into the mix the recently launched Dollar Store (both online and offline) and the duty-free joint venture with Swiss airport retailer Dufry AG, which Helfsein argues “strategically target both less developed and travel retail markets, the fastest-growing sub-segments in China’s retail industry.”
These initiatives “should increase user stickiness in BABA’s ecosystem.”
Driving further optimism is the upcoming Ant IPO. Ant Group – a sister company to Alibaba – is expected to go public in early November. The event has been making waves, as in the process, it has by become the largest IPO ever. The owner of China’s incredibly popular Alipay mobile wallet (over 1.2 billion monthly active users) now has a valuation of $280 billion.
Furthermore, driven by high-margin VAS (value added services) projects which now account for 55% of Alibaba’s cloud revenue, Helfstein believes Alibaba is on track for its cloud business to achieve profitability by FY21.
“We see cloud’s future growth dependent on ARPU expansion (spending shifting from infrastructure budgets to software budgets), driving continuous margin improvement and rapid revenue growth,” the analyst concluded.
Overall, Helfstein rates BABA an Outperform (i.e. Buy) while his $335 price target indicates a 7% uptick from current levels. (To watch Helfstein’s track record, click here)
Helfstein is not alone with his bullish BABA stance. In fact, all 22 other analysts who have posted a review over the past 3 months reached the same conclusion – Buy. The Strong Buy consensus rating is backed by a $334.15 average price target, implying shares will rise by 7% over the following months. (See Alibaba stock analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
