Bull of the Day: Alibaba Group (BABA)

Alibaba Group Holdings (BABA - Free Report) reported strong December quarter numbers on January 24 with top and bottom line beats and a whopping 54% year-over-year growth in sales.

Wall Street analysts liked that growth and the outlook going forward enough to raise estimates 23% for the current fiscal year (ending in March) from $2.15 to $2.65. And the next fiscal year also moves up 23% from $2.56 to $3.16.

Alibaba CEO Daniel Zhang highlighted "We are driving the age of 'New Retail,' which leverages big data and innovation to provide a seamless online and offline experience for nearly half a billion mobile monthly active users. This retail transformation will make it even easier and more efficient for brands and retailers to engage with these consumers anywhere, anytime."

After the conference call, my colleague Ryan McQueeney explained "Alibaba further detailed its 'New Retail' concept, saying that it will help the company tap into the entirety of China’s $4.8 trillion retail sector by breaking down the distinction between online and offline commerce. To that end, Alibaba has started partnering with several different brick-and-mortar retailers.

Wall Street Goes Gaga Over BABA

For this Bull of the Day, I thought it would be interesting to also hear from the analysts whose upward revisions to growth estimates have once again made the stock a Zacks #1 Rank. Here are 5 viewpoints on the Amazon (AMZN - Free Report) of China...

RBC Capital maintained their Outperform rating on Alibaba and kept their price target of $120 citing strong China retail sales growth and the new Cloud Computing division reaching a $1 billion revenue run rate.

Goldman Sachs analyst Piyush Mubayi raised their FY17-FY19 revenue estimates by 3-4% on better growth outlook for China online advertising and International retail, and raised EPS estimates by 5-7% due to higher operating leverage. The firm reiterated their Conviction List-Buy rating on the stock and moved their price target from $128 to $135.

Deutsche Bank raised its price target from $140 to $148 noting that the company attributed strong results to solid consumer usage, merchant spend, and impressive user growth, with mobile MAU (monthly active users) reaching 493 million, representing 25% growth. Here were some other important comments from their report...

"Online marketing services again expanded robustly, by 47%, mainly driven by paid click growth. Commission revenue accelerated to 32% yoy, reflecting Tmall GMV growth recovery. Core e-commerce margin saw continued expansion to 64%, despite investment in globalization, FMCG & rural Taobao.

"The company lifted FY17 full year guide from 48% to 53%. The new guide should be easy to achieve given BABA’s strong momentum. Alibaba's "New Retail" strategy meanwhile seeks to integrate more offline retailers (e.g. Intime) with integrated inventory, membership and services to serve both users and merchants more efficiently. Monetization should thus increase long term."

Morgan Stanley raised its price target on BABA shares from $130 to $140 and maintained their Overweight rating.

Analyst Grace Chen noted "Alibaba raised F17 sales guidance from 48% YoY growth to 53% YoY after the stronger than expected F3Q17 results. It is transforming from an eCommerce to a marketing platform, which enables it to capture more merchant spending, expanding from distribution to marketing services. For F18, the company will focus on globalization, rural China, and cloud/big data to propel
growth."

SunTrust analysts discussed 3 key points in their review of the quarter: 1) Core and organic revenue growth accelerated driven by engagement (clicks). FY revenue guidance increased to 53% YoY growth vs. 48% prior. 2) Core EBITA profitability of 64% was inline/better while investments in Lazada, Tmall Supermarket, and "New Retail" continue; and 3) Outlook for improved Cloud and Digital profitability remains positive for FY’18.

The firm reiterated their Buy rating based on strong core growth and profitability, prudent growth investments, and the portfolio of assets. Their $125 2017 price target implies a sub-25X multiple for calendar year 2018 EPS.

by Kevin Cook

Source: https://www.zacks.com/commentary/102865/bull-of-the-day-alibaba-group-baba

Wall Street Breakfast: Black Friday In Full Swing

 Includes: ALIOY, AMZN, ATSG, BA, BHP, BTI, DB, DBOEY, DLAKY, EADSY, 

Black Friday isn't as big as it once was due to earlier holiday deal hysteria, but it's still a very significant day for retail. The National Retail Federation expects 137.4M Americans to hit stores at some point over the weekend, and around 74% of that population already went shopping on Thanksgiving Day. That's about on par with last year's figures as online sales become a bigger part of the holiday. Adobe even expects Black Friday web purchases to top $3B for the first time, up 11.5% from 2015.

Economy

Despite a minor pullback overnight, the dollar continues to climb past more of last year's peaks against the euro. Only the March 2015 high of $1.0457 is now standing in the way of a push towards parity that banks are again saying is on the cards. The greenback is currently worth more than 7.5%against a basket of major trading partners than it was three months ago.

Japan's core consumer prices marked their eighth straight month of annual declines in October, illustrating the sheer scale of the BOJ's struggle to beat deflation and stagnant growth with diminishing policy options. The nationwide core consumer price index, which includes oil products but excludes volatile fresh food costs, fell 0.4% from a year earlier, keeping policymakers under pressure.

German news roundup: Business morale was unchanged in November as Ifo's business climate index remained steady at 110.4, while it was confirmed that the country's final GDP halved its growth rate to 0.2% in Q3. Meanwhile, European Parliament President Martin Schulz is stepping down in January to run in next year's elections in Germany, where he is seen as a potential rival to Chancellor Angela Merkel.

Consumers and businesses increased their spending in Q3 as the U.K. economy registered a resilient performance following the Brexit vote. Household spending rose 0.7% from the second quarter and business investment increased 0.9%, according to the Office for National Statistics. Growth overall was unrevised at 0.5%, with trade providing the strongest contribution.

Faced with a rapidly sliding currency in the wake of the U.S. presidential election, the Turkish central bank raised interest rates yesterday for the first time in almost three years. The lira bounced higher after the decision, which included a 0.5 percentage point rise in its benchmark one-week rate to 8%, but reversed course swiftly, hitting a record low. The currency now stands at 3.42 to the dollar, down 15% this year and over 9% in November alone.

"Turkey could open its gates for migrants to Europe if pushed by the EU," warned President Tayyip Erdogan, a day after European lawmakers voted for a temporary halt to EU membership talks with Ankara. MEPs overwhelmingly backed the decision citing Turkey's post-coup purges, the closure of numerous media outlets and the possible restoration of the death penalty.

A new peace accord was signed Thursday between Colombia's FARC rebels and President Juan Manuel Santos, who said he would seek congressional ratification instead of a popular referendum that was rejected in October. But his political opponents have promised a fight in congress and are considering the viability of collecting signatures for a petition calling for another plebiscite.

Crude prices are little changed as uncertainty ahead of a planned OPEC-led crude production cut and thin liquidity due to Thanksgiving kept traders from making big bets on markets. OPEC is due to meet on Nov. 30 to coordinate a cut, potentially together with non-OPEC member Russia, but there is also disagreement within the producer cartel as to which member states should cut and by how much.

Stocks

Johnson & Johnson has approached Actelion (OTCPK:ALIOY) about a potential takeover in a bid to boost its pharma business, Bloomberg reports. Europe's largest biotech firm has two pulmonary arterial hypertension drugs which J&J (NYSE:JNJ) would love to get its hands on, but deliberations are still at an early stage. Shares in Actelion are up around 13% so far this year, valuing the company at around $17B.

Nasdaq is planning a new trading option for investors to rival IEX Group, the startup that won regulatory approval in June to launch a market with a "speed bump." In a letter to the SEC, Nasdaq (NASDAQ:NDAQ) proposed a so-called extended life priority order attribute, which would benefit long-term investors who may not be monitoring minute changes in market prices.

The finance chief of Deutsche Boerse is warning that global rivals would become dominant if the German group's planned $28B merger with the London Stock Exchange (OTCPK:LNSTY) was blocked by European regulators. "The Americans will sit down together with the Chinese to regulate the market," Deutsche Boerse's (OTCPK:DBOEY) Gregor Pottmeyer said at an industry event in Frankfurt.

Wells Fargo has asked a U.S. District Court to order dozens of customers who are suing the bank over the opening of unauthorized accounts to resolve their disputes in private arbitrations instead of court. The motion is in response to the first class action lawsuit filed against Wells (NYSE:WFC) since it agreed to pay $185M in penalties and $5M to customers for opening up to 2M accounts in their names without permission.

In a letter sent to financial watchdogs, a group of U.S. lawmakers has reportedly warned that President-elect Donald Trump could provide special protection for Deutsche Bank (NYSE:DB). Some House Democrats say he will have "ample opportunity to influence policy decisions," including the DOJ's proposed $14B fine, and claim the German institution is the only major Wall Street bank that has continued to lend to Trump Inc. DB -1.5% premarket.

Wall Street Breakfast: Alibaba Can't Find Its Match

 Includes: AAPL, AMZN, AZN, AZSEY, BABA, CBS, CHAT, CME, DIS, F

Alibaba has set new records for its annual Singles' Day event as sales reached $1B in the first five minutes and hit $14.3B about two-thirds of the way through the day, already tying with last year's total. The world's biggest retail event features 6M products from 30,000 brands sold by 40,000 merchants and is closely watched for clues on the health of China's economy and its largest online retailer - Alibaba (NYSE:BABA).

Economy

The Dow closed at a new all-time high on Thursday as investors continued to embrace the Trump Trade, putting the index within striking distance of 19,000. But is the recent rally build to last? That's the question traders are now asking. While shares were heavily mixed across the globe in overnight action, U.S. futures are now starting to fade.

Central banks from India to Indonesia have stepped in to stabilize their currencies on deepening concerns that Donald Trump will pursue policies that spur capital outflows from developing economies and weaken their exports. Meanwhile, the dollar is on course for its best week in a year, racking up another round of gains against the yuan and peso and steadying just off the previous day's highs against the euro and yen.

While stock markets will remain open today for Veterans Day, bond investors - who can use some rest after being pummeled over the past few sessions - will have the day off. Underpinned by the view that Trump may need to dig deeper into America's coffers, yields on the 10-year Treasury note have risen 33.5 basis points this week, marking the largest stretch of yield gains since June 21, 2013.

Donald Trump's transition team is racing to form his cabinet as more names were floated for some of the biggest jobs in the president-elect's administration. Possible candidates: Jeff Sessions, Rudy Giuliani, Newt Gingrich, Chris Christie, Reince Priebus, Jeb Hensarling, Mike Huckabee, Sarah Palin, Carl Icahn, Ben Carson, Peter Thiel and Jamie Dimon. An initial website for the transition went online on Wednesday, but Trump has yet to name a chief of staff.

Brazil has been plunged into a fresh bout of political uncertainty after lawyers for former president Dilma Rousseff presented evidence suggesting her successor, Michel Temer, accepted bribes from a construction company. If the court rules that occurred, it could reverse her entire ticket's win. That would mean Temer, a member of the Brazilian Democratic Movement Party, would also be removed from office.

Stocks

Disney said it expects modest earnings growth next year and an even more robust rise in 2018, sending the stock up in after-hours trade after an initial fall. The assuring message came after the media company reported weaker-than-expected earnings in Q3 - hit by a drop in ad sales and subscribers at its struggling ESPN unit. New deals with Hulu and AT&T/DirecTV (NYSE:T) could also help Disney (NYSE:DIS) attract elusive millennial customers.

Allianz beat expectations in the third quarter, posting a 37% rise in net profit to €1.86B. Europe's largest insurer saw improvements across all its businesses, including bond fund manager Pimco, which logged net inflows for the first time in three years. Quarterly operating profit also beat forecasts, rising 18% and helping Allianz (OTCQX:AZSEY) reaffirm its full-year target.

Wells Fargo is changing the way it handles whistleblower complaints following allegations it retaliated against employees who called an ethics hotline to report sales abuses. CEO Tim Sloan announced the change at a gathering of about 2,000 employees in Des Moines, Iowa, as part of a "conversations tour" he and other Wells (NYSE:WFC) executives are making to try and restore employee morale after the bank's recent scandal.

CME Group CEO Phupinder Gill will retire at the end of the year, according to a statement issued by the world's largest futures market operator, with executive chairman Terry Duffy taking on his role after he leaves. The surprise departure was announced just a year after Gill extended his employment contract with CME to 2019.

Saying it was too easy to spend their parents' money, Seattle District Judge John Coughenour has set up a year-long process to reimburse customers whose children made Amazon (NASDAQ:AMZN) in-app purchases without permission, but rejected an FTC request for a $26.5M lump sum payout. The agency already settled similar cases against Apple (NASDAQ:AAPL) and Google (GOOG, GOOGL). All three companies now require a password for in-app purchases or an opt-in to enable purchases without a code.

"I was never a great proponent of the split of the two companies," said Shari Redstone, vice chair of the board at CBS and Viacom (VIA, VIAB). "Scale will matter to your advertisers, who more than ever have to reach the consumer on a number of platforms." A decade ago, Sumner Redstone decided to divide the two into separate companies, and while CBS has thrived, Viacom has wrestled with falling ratings and declining ad sales.

The FCC has sent a letter to AT&T (T) to express concerns over the company's practice of exempting its own streaming video services from data usage caps for its wireless customers and demanded answers by Nov. 21. AT&T began the practice known as "zero rating" with the DirecTV video app in September and plans to do the same for its over-the-top service DirecTV Now when it launches
later this month.