Wells Fargo says Alibaba will soon be bigger than Wal-Mart
In a note Thursday, Wells Fargo's Matt Nemer and Trisha Dill wrote that Chinese e-commerce giant Alibaba is well on its way to the top spot (emphasis added):
"Alibaba is the clear eCommerce leader in China, but still stands to gain from overall eCommerce growth in China, market share expansion (e.g., new categories, increased mobile monetization, offline initiatives) and longer-term, international expansion. We estimate BABA will soon be the largest retailer in the world, with much better returns and margins than the current leader: Walmart."
Wells noted that on top of the solid quarterly earnings result reported Thursday, Alibaba dismissed fears related to the hiring freeze that were thought to dampen earnings. Still, the firm lowered its earnings estimate for 2016 earnings per share to $2.77 from $2.95.
Among the things going great for Alibaba, Wells noted, are a 40% jump in gross merchandise volume, strong growth of active buyers, and growth in mobile revenues.
Among the negatives, Wells noted the slowdown of growth in Taobao, its large online retail platform. The firm has an "Outperform" rating on the stock, with a 52-week price target range of $77-$120.
On Thursday, the stock rallied 7.5% to close at $86 per share after the earnings beat.
Alibaba reported quarterly sales of $2.8 billion, up 45% year-over-year, and better than the forecast for sales of $2.6 billion. The company posted adjusted earnings per share of $0.48, also topping expectations for $0.42.
Wal-Mart currently has a market cap of $250 billion; Alibaba's is $199 billion.