Alibaba's Offline/Online Business Models Expand Market Opportunity, Analyst Says
Following the second day of Alibaba Group's (NYSE: BABA) three-day Investor Day, an analyst at UBS came away bullish on the company's online and offline business models.
The Alibaba Analyst: Jerry Liu maintained a Buy rating and a $330 price target for Alibaba shares.
The Alibaba Thesis: Significant untapped opportunities exist for Alibaba in multiple online to offline businesses, likely expanding its total addressable market, Liu said. Alibaba's newer Freshippo formats such as B2C, Mini and Pick & Go, should address more users, use cases and product categories as opposed to the regular Freshippo stores.
Freshippo is testing two more new formats, namely X membership, similar to the Costco Wholesale Corporation (NASDAQ: COST) model, and community group buying, the analyst said, citing reports.
There are still significant unrealized synergies with respect to online food delivery platform Ele.me, which the company acquired in 2018.
"Ele.me can do more to cross sell to users acquired by Alipay and Taobao, and Ele.me in turn can help both apps retain users by adding local services and consumer loan use cases, in our view," the analyst wrote in the note.
UBS also came away impressed with consumer-facing developments at Alibaba. Cloud revenue growth is likely to accelerate and margins in the segment could improve, thanks in part to government policy support post-COVID-19.
"We believe recent investments on industry solutions are paying off, and cloud margins could turn positive in a couple years," the analyst said.
BABA Price Action: Alibaba shares trade around $277.20.
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Sep 2020 | Loop Capital | Maintains | Buy | |
Aug 2020 | Argus Research | Maintains | Buy | |
Aug 2020 | B of A Securities | Maintains | Buy |
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