Alibaba Rises on Buy Rating Initiation From Needham

Needham starts coverage of Alibaba Group with a buy rating and $275 share price target.
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Alibaba Group  (BABA) - Get Report “will remain the No.1 player in the e-commerce market," according to a Needham analyst, who initiated coverage of the Chinese e-commerce giant on Thursday with a buy rating.

Shares of the company were rising 1% to $260.28 on Thursday morning.

Analyst Vincent Yu, who set a $275 price target for the stock, also added Alibaba to his conviction list. 

Yu said in a note to clients that Alibaba should continue to be the top player in China's e-commerce market as it increases efforts to attract customers from lower-tier cities, although he warned that competition looms.

Alibaba's competitive strengths are its “well-established ecosystem, strategic position in the e-commerce value chain and deep understanding of China’s retail environment," Yu wrote. "[They are] not only competitive strength[s] in its primary business, but also keys to expanding its presence in adjacent industries such as offline retail, food delivery, and cloud computing."

Yu said Alibaba is best known for its Taobao and Tmall e-commerce platforms, the two largest in China. The analyst said he believes Taobao Live "is the best-in-class live-streaming format on the market, and that a secular shift is underway toward this new sales format."

"E-commerce live-streaming has quickly gained popularity in the past two years," Yu wrote. "The live-streaming format offers consumers interactive shopping experiences, entertainment values that do not come with traditional shopping experiences, and access to exclusive discounts that are not available elsewhere."

Yu said he believes "Tabao Live's industry-leading market position and highly efficient supply chain helped grow GMV (gross merchandise volume) over 100% in FY2020."

Alibaba shares surged on Wednesday on reports that its Ant Financial affiliate was looking to IPO.