Headqaurters: Hangzhou, China
February produced a bullish hammer after finding further support around the $60 area. May's bullish outside bar has been confirmed through a series of positive weekly candles including a bullish outside candle from the week of June 27.
MACD continues to show positive momentum as price action currently remains capped by the 2016 high around $82.
Anchor Industry/Company Drivers:
Medium term: Annual active buyers continues to increase (chart above) supported by higher levels of mobile penetration (71% mobile revenue as a percentage of China commercial retail revenue as at FY2016).
Longer term: The group enjoys a dominant position in its domestic market and has increased its footprint both geographically as well as into new markets, thus leaving it ideally placed for further expansion in the coming years.
Growth: It is PIA’s expectations that global internet/ e-commerce usage will continue to grow in the coming years on the back of increased broadband speeds and mobile penetration rates.
Recent results: Management commented that …“We achieved strong growth in mobile users, active buyers and transactions…..Our focus on long-term strategic priorities – globalization, rural expansion, building a world-class cloud computing business and creating a comprehensive media and entertainment platform – has laid a strong foundation for future growth..”
Revenue development: +33% year-on-year increase:
Standalone valuation: BABA has an Altman Z-Score of 6.74 (a read of >3 generally indicates solid underlying company financials).
Competitor/ Industry valuation: Trades at a premium to its peers when viewed on a Price/ Sales metric (trailing twelve months).
Most recent operating net cash: As at FY2016 non-Gaap EBITDA increased by 28% versus the prior year period with free cash flow rising by 7% to reach RMB51,279 million.
Wider broker stock sentiment: The market currently rates the name an ‘outperform’ – Source PIA research
BABA is due to release Q1 numbers early August (date to be agreed)
Management and risk description
As low risk market participants we would recommend a hard stop loss @ $55 on BABA
Entry: Buy at current levels
For breakout buyers (B): We would highlight $82 (late May 2016 highs)
For pullback buyers (P): We would highlight $70 (early March 2016) and $65
Stop: Hard stop at $55
Target: $90, $95 & $105
Time horizon: 3-9 months
Source: Saxo Bank. Create your own charts with SaxoTraderGO click here to learn more
— Edited by Clare MacCarthy
Non-independent investment research disclaimer applies. Read more