NEW YORK (TheStreet) - Following on the heels of the record-setting IPO of Chinese e-commerce company Alibaba (BABA) , shares of Dutch e-commerce firm Cnova (CNV) surged 6% on Tuesday after Wall Street sell-side analysts initiated coverage on the stock.
Though Monday, Cnova shares had been up 4% since the company's November IPO. Cnova, which was spun off from its parent Groupe Casino, raised $188 million by pricing 26.8 million shares on Nov. 20 at $7 a share. The stock is listed on the Nasdaq Global Select Market.
Cnova has nearly 13 million active customers through its Cdiscount sites and is a leader in France and the No. 2 e-commerce company in Brazil. The company also operates sites in Colombia, Ecuador, Thailand, Vietnam, Ivory Coast, Senegal and Belgium.
Here's what analysts said in their reports.
Justin Post, Bank of America Merrill Lynch (Buy; $11 PO)
We are constructive on Cnova (CNV), a multi-brand eCommerce company with a strong presence in France (~7% share), Brazil (~17% share), and several emerging markets. Cnova has growing market share, accelerating metrics and revenue growth, and an expanding third party marketplace which should drive gross merchandise volume (GMV) and gross margin expansion, which we view as the most interesting investment positive. We also think Cnova's relationship with its parent and its affiliates creates competitive advantages in purchasing and click and collect fulfillment vs. other companies targeting France and Brazil.
Based on a positive view on Cnova's market position in France and Brazil, we are initiating coverage with a Buy rating and $11 price objective. Our PO is based on 0.9x 2015 EV/Sales and our DCF analysis (which factors in long-term earnings potential), a discount to a global eCommerce comp group (excluding BABA and MercadoLibre (MELI) ) at 1.6x EV/Sales. Lack of significant near-term earnings, a complicated ownership structure, and a complex mix of businesses across geographies may result in an ongoing price-to-sales discount vs peers, but we think the discount is overdone. We think the discount could narrow as Cnova executes against its business plan for accelerating growth and margin expansion, and becomes more investable (only ~6% of shares outstanding currently trade, more likely coming).