Alibaba Climbs After Bernstein Says Mobile, Margin Potential Underappreciated

NEW YORK (TheStreet) -- Research firm Bernstein initiated coverage of Chinese e-commerce giant Alibaba  (BABA) with an Outperform rating, saying that the Street is underestimating the company's potential to grow volumes and improve margins.

WHAT'S NEW: Analysts are underestimating the gross merchandise volumes, or GMV, that Alibaba's Chinese e-commerce websites can generate, Bernstein analyst Carlos Kirjner wrote in a note to investors today. Also being underestimated is the company's ability to monetize its GMV, the analyst believes. Mobile will account for the vast majority of volume and monetization of mobile will improve to match or exceed those of PC, according to Kirjner. The Street is also not fully recognizing Alibaba's ability to increase its margins as monetization rises and its hiring slows, the analyst believes. Alibaba's stock may be volatile as the transition to mobile occurs and monetization of PC weakens, but continued GMV growth and improved mobile monetization should enable the company to beat expectations a year from now and beyond, he wrote. The analyst set a $120 price target on the stock.

PRICE ACTION: In mid-morning trading, Alibaba gained 2.4% to trade near $93 per share. Yahoo  (YHOO), which stated yesterday that its continues to work toward completing the planned spin-off of its remaining stake in Alibaba Group in the fourth quarter of this year, is up nearly 1.5% to $43.41 this morning.

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