China’s retail environment should “remain robust,” and ecommerce giant Alibaba
stands to benefit from that strength, Goldman Sachs says.
The bank estimates that retail revenues in China will keep improving thanks to an increase in consumer confidence and a higher click-through rate on online ads.
“We anticipate higher spending in lieu of competition in retail, rising content spending, and a step up in spending in Southeast Asia, with business-to-consumer, customer-to-customer, and payments falling in place for BABA in Indonesia,” analyst Piyush Mubayi said in a note Monday.
“We lift our 12m SOTP-based target price 1% to US$211, mainly on higher revenues as higher near-term spending does not impact our longer-term view on segment margins.”
Online sales only account for about 14% of retail sales in China, the bank says, so there is plenty of room left for Alibaba to grow. Here’s full breakdown:
“Recent strong growth in China’s retail industry and online consumption reinforced our bullish view on BABA’s China retail segment,” said the bank. “We expect the company to continue to outperform.”
Shares of Alibaba are up 74.55% over the past year, and are currently trading near $US180 — 17% below Goldman Sach’s price target.
Such astronomical growth has been met with some scepticism though. Alibaba is currently the most shorted stock in the world by a magnitude of two, and short sellers are refusing to throw in the towel despite losing billions of dollars.
They naysayers weren’t helped by the company’s most recent earnings report, which beat analyst’s estimates with a 56% jump in first-quarter revenue.