SunTrust provides key takeaways from its recent meeting with Alibaba executives; it also slightly reduced the earnings forecast
After its latest meeting with the executives of Alibaba Group Holding Ltd, SunTrust reaffirmed a rating of Buy on Baba’s stock, with a price objective of $100, according to the research note issues on Monday September 14, about Alibaba stock news. The company thinks that there might only be a marginal influence from the market and economic factors on per consumer spending.
The sell side firm’s conversation with the executives illustrates that user growth is still strong and that gross merchandise volume growth is being forced from the size of the order, because of an expected delay in more ticket purchases. The sell side firm reduced the year over year GMV growth estimate to 28% from previous 30%, but stick with the 29% year over year revenue growth estimate intact, as it expects that Alibaba has other monetization levers, like the latest PC ad units.
Robert S. Peck, an analyst at SunTrust reduced his FY16 revenue projection to $15.36 billion from $15.87 billion, and fiscal year 2016 earnings per share estimate to $2.63 from previous $2.72 per share, as reported by Alibaba stock analysis. He also lowered its fiscal year 2017 EPS forecast to $19.16 billion from $20.38 billion, and revenue forecast to $3.14 from $3.48.
The sell side firm mentioned that the conditions of Chinese economy, and its probable impact on company’s profit & loss, have taken the shareholders major emphasis. SunTrust believes that majority of investors overlooked assets now shown in profit & loss multiples. It projects these assets value to be roughly $40 billion, and thinks that it might be included in the valuation by the investors.
SunTrust believes that an article regarding Alibaba by Barron has taken out various fair consideration facts, which involves decreasing growth and market competition. However, the firm believes that various other adverse things were overstated.
The sell side firm also pointed out that Baba stock has lost approximately 21% of its market value in this quarter; the stock is currently trading at 17 times of fiscal year 2017 earnings per share. Roughly, if investments of $40 billion are excluded, the valuation looks to more striking at a price to earnings ratio of nearly 14 times.
Majority of the Street analysts are optimistic on Alibaba Group Holding stock, in spite of the substantial decline in the stock value; 45 analysts rate it as Buy, 5 suggests a Hold, while 2 recommend it a Sell rating. The average twelve month target price stands at $92.82, which reflects a 50% upside potential over present stock price.