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Analysts defend Alibaba post-earnings; shares close down 5.1%

  • Alibaba (NYSE:BABA) closed at $73.40 today, making new post-IPO lows after reporting mixed FQ1 results, a slowdown in Chinese marketplace (Taobao/Tmall) GMV growth to 34% Y/Y from FQ4's 40%, and a 19 bps Y/Y drop in take rate to 2.33% amid a mix shift towards mobile. Wedbush downgraded to Neutral, while several other firms simultaneously defended the company and cut their targets.
  • RBC's Mark Mahaney (Outperform, target cut by $14 to $91) provides a recap of investor concerns: "Relatively significant deceleration in GMV, Revenue, Active Buyers is negative. Several factors at play– [one-time] events (e.g. Feb suspension of Online Lottery), possible macro softness, Large Numbers Law, and possible market share losses."
  • At the same time, Mahaney praises Alibaba's improving mobile monetization - mobile take rate rose 67 bps Y/Y to 2.16% - and notes growth is still considerable. “We view this as a very effective management team with a sound strategy. And we see BABA as having significant option value in non-retail revenue streams in China, int’l expansion, and a series of major strategic investments.”
  • Cantor's Youssef Squali (Buy, target cut by $15 to $95): "We are maintaining our positive long-term bias on BABA based on the company’s strong position within China’s rapidly growing commerce segment and potential for success outside of China ... User growth, while still healthy, slowed vs. expectations. We expect Alibaba to continue to dominate the rapidly growing Chinese ecommerce market for years to come, but we also believe that nearterm predictability of growth and margins has deteriorated given the macro backdrop in China.”
  • In addition to Chinese macro pressures, concerns have been aired about share loss to smaller rivals that directly sell to consumers. JD.com respectively saw 61% and 82% Y/Y revenue and GMV growth in calendar Q2 vs. Alibaba's 29% and 34%; Vipshop's Q2 revenue rose 75% Y/Y.
  • Along with its results, Alibaba has announced Macy's is the latest major U.S. retailer to open a shop on Tmall. Also: The WSJ reports Alibaba and Tencent plan to invest in smart TV startup Whaley Technology.
  • FQ1 results, details

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