On Apr 4, we issued an updated research report on Alibaba Group Holding Limited BABA.
The company’s dominance in the mobile commerce market, continued efforts to develop new products, international opportunities, and cloud and media initiatives will continue to spur growth.
Notably, Alibaba has had an impressive run on the bourse last year. The company’s shares have gained 59.8%, outperforming its industry’s growth of 44.1%. We expect international expansion to back the momentum going forward.
Alibaba Group is a Chinese e-commerce giant, catering mainly to its native market. The company is dependent on China for a major portion of its business, where growth has already reached its peak. Hence, Alibaba is trying to diversify its revenues and lessen reliance on its business in China.
To counter this and fend off further competition, Alibaba is focusing on international expansion. Its current strategy is to generate earnings through investments outside China, where it’s up against well-established players like JD.com and Amazon AMZN that have been witnessing great success.
In order to continue expanding its international presence, the company agreed to pay an additional $2 billion for increasing its stake in e-commerce firm, Lazada, last month. With this recent investment in Lazada, Alibaba will increase its presence in a nascent but populous online retailing market. The South East Asian e-commerce market is still at a nascent stage but has enormous growth opportunities, which is a huge advantage for Alibaba.
GoDaddy is also active on the acquisition front. Recently, the company announced the acquisition of the remaining outstanding shares of a China-based food delivery start-up, Ele.me. The latest deal will help Alibaba expand product offerings in the food delivery market. Moreover, its customer base will increase and market position is likely to strengthen. Thus, the company will be able generate higher revenues.
The company is also working on the development of what it calls “New Retail” to bridge the gap between online and offline shopping using its big data capacity. It expects that the system will offer brick-and-mortar retailers new ways to evolve across marketing, inventory and distribution networks. These look promising and will not only reshape the retail landscape but also help Alibaba fend off competition.
Positive Earnings Surprise History: Alibaba has a decent earnings surprise history. The company outpaced the Zacks Consensus Estimate in two of the trailing four quarters, delivering an average positive earnings surprise of 11.39%.
Alibaba Group Holding Limited Price and Consensus
Alibaba Group Holding Limited Price and Consensus | Alibaba Group Holding Limited Quote
Zacks Rank & Other Stocks to Consider
Alibaba carries a Zacks Rank #2 (Buy). Some other top-ranked stocks in the technology sector are Stamps.com Inc. STMP, PetMed Express PETS and Amazon. While Stamps.com sports a Zacks Rank #1 (Strong Buy), PetMed and Amazon carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Long-term earnings per share growth rate for Stamps.com, PetMed and Amazon is projected to be 15%, 10% and 26.8%, respectively.
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