Alibaba shares jumped by about 2% on Tuesday after another pair of bullish analyst reports. One firm pointed out that the Chinese online retailer is greatly under-owned by large-cap growth funds. The other raised its price target 18%, the year-to-date tear the stock has been on will continue.

Alibaba

“Enthusiastically bullish” on Alibaba

In a report dated September 26, MKM Partners analyst Rob Sanderson said he is still “enthusiastically bullish” on Alibaba following a series of investor meetings with the company’s management last week. He said a key question investors have been asking is who will be incremental buyers of the retailer’s stock, particularly as the shares near their highest levels after the initial public offering.

The analyst feels it’s easy to determine who might buy Alibaba shares after a review of the last set of filings for institutional investors. He said as of that set of filings, large fund managers were “significantly underweight” Alibaba.

Great opportunities in Alibaba shares

According to Sanderson, 24 of the top 25 institutional investors with holdings in U.S.-based Internet mega-caps are underweight Alibaba, based on their June 30 filings. He described the sixth largest funds as “significantly underweight” the Chinese online retailer. He added that in order for these funds to reach equal weighting, they would have to snap up approximately 800 million shares.

He also found a “meaningful” underweight position in the top 25 funds with holdings in China Internet large-caps. In order for this group to reach equal weighting, the funds would have to buy approximately 195 million shares. He added that as of June 30, this group only held a total of 204 million Alibaba shares.

Sanderson also noted that about 60% of the outstanding shares are held by management and employees, while sovereign wealth funds and six low turnover funds hold another 10% of the shares. In other words, for a mega-cap, he says Alibaba is a closely held stock.

Alibaba compared to Facebook

Interestingly, the MKM analyst also drew some comparisons between the online retailer and Facebook, stating that others are doing the same. Investors of both companies were disappointed after the IPOs because the transition to mobile happened faster than was expected. In both cases, the shift was deflationary, and in Alibaba’s case, the tipping point came in the last quarter when mobile monetization passed desktop.

He believes there’s a long ramp ahead for the online retailer in terms of monetization. One good difference Alibaba has going for it is that monetizing commerce is easier for investors to understand than news feed ad monetization was. Also the retailer has a better engagement story and a broader range of under-monetized assets, he feels.

On the flip side, the company deals with country-specific concerns related to the macro environment in China, currency risk, and a lack of trust for Chinese business practices. Further, he notes that the company’s structure is more complex, and the SEC has requested more information on its relationships with affiliates.

Alibaba price target upped 18%

In their report also dated September 26, Kim Seng analysts Mitchell Kim and Jeffrey Kwong raised their price target for the company’s stock 18% to $130, placing their target in line with Sanderson’s. Even though Alibaba stock is up 33% year to date, they see more room for upside due to monetization potential through rising take rates and higher pay for performance rates and volume.

They like the company’s platform because it can grow revenue through more than just transactions or listing commissions, unlike traditional platforms like eBay or JD.com. They also added $10 per share to their valuation for the inclusion of Ant Financial, which has now had two rounds of private-equity financing. The last round hit a valuation of $60 billion.

Alibaba shares rose 2.24% to close at $108.26 on Tuesday.

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