Alibaba (BABA) is currently under the Chinese regulators’ microscope, and founder Jack Ma’s fall from grace has been well-documented. However, none of these issues stopped the e-commerce giant from posting strong F3Q21 results on Tuesday.
In the quarter, Alibaba delivered revenue of $33.88 billion, a 37% year-over-year increase and coming in ahead of consensus by $530 million. FQ3 Non-GAAP EPADS of $3.38 beat the Street’s forecast by $0.13.
The company added 22 million customers to its Chinese online retail marketplaces to end December 2020 with 902 million mobile MAUs (monthly active users) and 779 million annual active consumers.
While growth in its fast-growing cloud computing segment slowed down a tad, it still increased by a healthy 50% year-over-year in what amounted to the cloud business’ first ever profitable quarter.
Despite the robust showing, the market’s reaction was generally subdued, most likely a reflection of the regulatory issues the company faces. However, the dual overhangs of an antimonopoly investigation and the uncertainty regarding the IPO of sister company Ant Financial are not enough to cast a shadow over Alibaba’s value proposition, says Truist analyst Youssef Squali.
“With 1 of 2 people in China on the platform (per mgmt), we believe BABA is an excellent position to continue to grow users and increase its wallet share from its existing base,” the 5-star analyst commented. “With Core Commerce showing healthy growth and margins, and with emerging segments showing improving profitability, we view mgt's aggressive stance on investments in new initiatives (Deals, Live, Short Video and Grocery) as appropriate even if likely to pressure margins S/M terms, given the compelling TAM/ growth opportunities ahead.”
Unsurprisingly, then, Squali reiterated a Buy rating on BABA shares and sticks to a $326 price target. Investors could be sitting on returns of 24%, should Squali’s target be met over the next 12 months. (To watch Squali’s track record, click here)
The rest of the Street almost unanimously agrees. While one analyst recently issued a Hold rating, all 22 other reviews say Buy. A Strong Buy consensus rating, is backed by a $325.11 average price target, suggesting room for 28% of share appreciation in the year ahead. (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.