Alibaba continues to show solid growth, but the Chinese government’s devaluation of the currency and the continuing suspension of lottery sales continue to drag on the company’s growth. Also management continues to invest in a broad range of areas, which is further weighing on the e-commerce giant’s bottom line.
Alibaba’s organic growth looks strong
As a result, Oppenheimer analysts trimmed their price target from $105 to $90 per share, although they maintained their Outperform rating on the stock. Alibaba posted a 36% increase in growth merchandise volume excluding lottery sales, which analyst Jason Helfstein and his team said indicates that top-line trends are stable. Mobile trends continue to improve, and they think mobile sales could surpass desktop sales sometime in the 2017 fiscal year. They’re expecting a negative impact of 1% on gross merchandise volume and 5% on revenue as a result of the suspension of online lottery sales.
Alibaba impacted by currency devaluation
The Chinese government recently made the decision to devalue the yuan twice in two days, bringing it down 3% in value. The Oppenheimer team is estimating a permanent impact of 3% on fiscal 2016 revenue and 4% on fiscal 2017 revenue with “minimal downside from imports.”
Alibaba’s continued investments will likely continue to weigh on its margins. Management has been focusing on improving the mobile shopping experience, cross-border e-commerce, offline infrastructure and big data. As a result, the analysts are expecting margins to be flat or slightly down in the near to medium term.
Alibaba continues to sign partnerships
Another trend we’ve been hearing about recently with Alibaba is the signing of partnership deals, and this trend continues with partnerships with Suning, Macy’s, and Laox. Also UCWeb began partnering with SINA and YOKU in the area of mobile personalization. The Oppenheimer team also noted that Alibaba’s click-through rate received a 1% boost from the recent Tianchi Big Data Contest, which they say provides “monetization headroom” for the Chinese online retailer.
As of this writing, shares of Alibaba were down 1.82% at $69.04 per share after an especially rough trading day on Thursday.