Chinese Economic Weakness Could Trump Alibaba (BABA) Monetization, Cutting PT - Wedbush

Wedbush analyst, Gil Luria, recognizes Alibaba's (NYSE: BABA) increased monetization and margin control but is more concerned about the Chinese economy and cut his target price.

Revenue grew 32% to $5.3 billion and beat consensus of $5.07 billion. Non-GAAP EPS of $0.99 topped consensus $0.88 on better than expected margins. Overall monetization rate showed significant sequential improvement by growing 56 bps to 2.98%, driven by mobile monetization rate reaching an all-time high of 2.88% and desktop monetization rate rebounding to 2.98%. Adjusted EBITDA margin also improved to 55.3%, the highest level since FQ3 2015.

GMV growth of 22.5% was a 5.8% sequential deceleration from FQ2 and less than half last year’s growth. Desktop GMV continued its accelerating decline, down (32)%, driven by the secular shift to mobile. However, Mobile GMV growth of 99% represented a 23 ppt sequential deceleration. Taobao growth slowed to 14% (down from 43% in the year ago quarter) and TMall growth slowed to 37% (down from 60% in the year ago quarter).

Despite raising estimates, the analyst leaves the Neutral rating and reduces the PT from $75 from $80 on greater economic risks. FY16 estimates increase to $2.84 from $2.56.

For an analyst ratings summary and ratings history on Alibaba click here. For more ratings news on Alibaba click here.

Shares of Alibaba closed at $66.92 yesterday.

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