Bernstein upgrades Alibaba, says shares can rally more than 20% from here

Now is an optimal time to buy shares of Alibaba , according to Bernstein. “We are upgrading Alibaba as we expect the company’s incremental GMV share to improve in the coming quarters as we lap the merchant exodus last year and softer macro comps, and expect lower strategic initiatives spend to drive acceleration in China Commerce EBITA growth,” wrote Robin Zhu in a note to clients Wednesday. “We think US$85-90 will stick as a floor for valuation, and see attractive risk-reward after the pullback in the past week,” he added. Alibaba’s stock has fallen nearly 12% this year and sits nearly 52% off its 52-week high. Shares could rally 24% from Tuesday’s close based on the firm’s fresh $130 price target, up from $115. Among his reasons for liking the stock, Zhu believes that Alibaba’s gross merchandise value, a common measure of total sales value, can bounce back. He also expects an IPO at Ant to benefit the company’s valuation. “We’re probably still 12-18 months away from livestreaming e-commerce share gains slowing in earnest,” he wrote. “But as this happens we think Alibaba’s incremental GMV share can rebound — say back to the 20% range. Alibaba management have sounded more confident lately, and argue core margins will stabilize in the coming quarters.” — CNBC’s Michael Bloom contributed reporting

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