Alibaba Surging After Revenue Beat: What Wall Street's Saying

SAN DIEGO, CALIF. (The Street) -- A day after Chinese Internet conglomerate Alibaba (BABA) posted revenue for the September quarter that came in 5% greater than analyst estimates, shares of the e-commerce company shot up to a new intraday high of $110.14 and were trading in the afternoon 3% higher over Tuesday's close price at $109.33.

Alibaba reported earnings of 45 cents a share on $2.74 billion in revenue. Profit was inline with expectations, but, thanks to strong mobile sales, revenue came in materially higher than the market consensus of $2.61 billion. Mobile revenue was $606 million for the quarter, up more than 1,000% year-over-year, and mobile purchases accounted for 35.8% of total gross merchandise volume (GMV).

Watch the video below for a look at how Alibaba became an e-commerce giant:

Must Read: 3 Biggest Takeaways From Alibaba's First Post-IPO Earnings Report

The company is getting kudos from analysts surprised by its ability to speed up both revenue growth and GMV growth, which are not easy feats considering Alibaba's already large size. GMV, or the total sum from purchases made on Alibaba properties, grew 49% over the year ago quarter.

Following the quarter, analysts remained upbeat on Alibaba's present and future outlook, but did take note of rising stock-based compensation (SBC) costs, which rose 248.4% year-over-year, and lower-than-expected margins.

Here's what Wall Street is saying about the quarter.

BMO Capital Markets analyst Edward Williams (Outperform, $115 PT)

"We believe Alibaba can grow revenue and profits substantially over the next several years, as the company further penetrates the largest and fasting-growing major e-commerce market in the world, boosted by numerous strong secular growth trends. Our price target of $115 is based on 28x our CY2016 adjusted EPS estimate plus strategic investments and excess cash -- a reasonable multiple, in our view, given the significant growth opportunity and the ability to continue generating strong cash flow. We believe the company's stock price could rise over the next year with growth driven by several factors: 1) a leading position in a large, relatively underpenetrated, and rapidly growing e-commerce market; 2) a dominant mobile platform with a growing user base and increasing mobile monetization rates; 3) expansion into new verticals and geographies; and 4) appealing option value from Alipay and other non-core businesses."

Jeffries analyst Cynthia Menga (Buy, $118 PT)

"Annual active buyers on China retail marketplaces grew strongly to 307mn, +52% YoY. Coupled with rising consumption spending and high user stickiness displayed by its customers, we believe this will drive Alibaba's long-term revenue growth. According to management, average annual spending of a user who has one year shopping experience on Alibaba's China retail platform is approximately RMB1,000, while users with five-year and ten-year history spend RMB15K and RMB30K annually. Alibaba will continue to invest in category, product and service expansion as well as user engagement enhancement. We revised up FY3Q15/FY15 revenue est. by 0.4%/1% and profit est. by 11.7%/5.8% respectively."

Wells Fargo Securities analyst Matt Nemer (Outperform, $123 - $126 Valuation Range)

"BABA reported a strong FQ2, beating our estimates and consensus on both the top and bottom line. The beat was driven by an acceleration in core operating metrics such as GMV, active buyers, and mobile monetization rates (a key investor focus given mobile take rates are lower than PC, but mobile GMV is growing faster). We're encouraged by the acceleration in Taobao GMV growth (38% vs. 33% in FQ1), the core traffic engine that ultimately leads to increased monetization for the company's other marketplaces."

MKM Partners analyst Rob Sanderson (Buy, $125 PT)

"We see BABA as a core holding for growth investors and are not changing our $125 PT at this time. BABA reported the cleanest quarter of the high-growth Internet stocks, in our opinion, and we think the stock is set up to perform well in any potential year-end market rally."

Pacific Crest Securities analyst Cheng Cheng (Outperform, $127 PT)

"Mobile take-rates improved significantly to 1.87% in FQ2 from 1.49%. Mobile take-rates are now 73.7% of PC take-rates, up from 49.4% in the previous quarter. Furthermore, commentary from the company seems to suggest that this progress is from natural improvement related to increased consumer demand for mobile driving increasing advertiser interest in mobile. We view current mobile take-rate levels as sustainable and believe that take-rates still have room to grow as mobile traffic grows. We also point to the upcoming FQ3 period, which includes the 11/11 e-commerce holiday, as a quarter that typically posts very strong mobile GMV and mobile take-rate trends. The progress in mobile monetization in FQ2 should help to alleviate a major concern for investors who still have questions around Alibaba's transition to mobile."

Cantor Fitzgerald analyst Youssef Squali (Buy, $110 PT)

"As expected, BABA's 2Q:FY15 results came in strong, particularly on the top line, with accelerating revenue growth, while the bottom lines were somewhat noisy with higher SBC, increase in amortization expenses and consolidation of newly acquired businesses. Not surprisingly, management refrained from guiding but suggested that investments in new initiatives and increased mktg for the all-important 11/11 promotional event, are likely to remain elevated. A differentiated pricing model, strong brand and unmatched scale continue to give Alibaba an unfair competitive advantage relative to peers both in and outside China. We believe the company's outsized growth and margin profiles should support higher valuation over time."

Topeka Capital Markets analyst Victor Anthony (Buy, $125 PT)

"Revenues, Adj. EBITDA and Adj. EPS were ahead of our estimates and the consensus. Margin declines, lower desktop monetization, and elevated capex gets the quarter an A-. Our thesis is unchanged. The scale and the magnitude of the opportunity ahead for BABA makes the stock a compelling buy."

Must Read: Yahoo!'s Alibaba Cash Could Trigger a Buying Binge in Tech

Written by Jennifer van Grove in San Diego, Calif.

>Contact by Email.

Follow @jbruin

If you liked this article you might like

Trade Wars Top Global Investor Fears, but Tech Stocks Still in Favor: Survey

Trade Wars Top Global Investor Fears, but Tech Stocks Still in Favor: Survey



Facebook, AT&T, Time Warner, Google and Alibaba - 5 Things You Must Know

Facebook, AT&T, Time Warner, Google and Alibaba - 5 Things You Must Know

Facebook Under Fire and 4 Other Business Stories You Must Know Monday Morning

Facebook Under Fire and 4 Other Business Stories You Must Know Monday Morning

Alibaba Pops on Possible China Listing; Cyber Security Deal Buzz Ramps -- ICYMI

Alibaba Pops on Possible China Listing; Cyber Security Deal Buzz Ramps -- ICYMI