Alibaba Continues To Win Wall Street's Favor

December 28, 2014

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Alibaba Group Holding Ltd (NYSE: BABA) continues to win the favor of Wall Street analysts roughly three months following its ballyhooed initial public offering.

Shares are up nearly 13 percent since the September 18 IPO versus about 6 percent for the S&P 500.

Of about 36 analysts covering the shares, 32 currently rate it at Buy or equivalent, while four maintain Hold ratings.

Cantor Fitzgerald's Youssef Squali last month said the China e-commerce company "has an unfair competitive advantage" and dominates its market.

And it's a market likely to grow. About 300 million people in China shop online, or about half the country's Internet users, while more than half the country's population continues to lack Internet access.

"The company's outsized growth and margin profiles should support higher valuation over time," Squali said.

Susquehanna's Brian Nowak applauds the company's lack of warehouses and delivery services that burden the operations of companies like Amazon.

"We like BABA's competitive positioning and asset-light operating structure," Nowak said, adding those factors will result in "industry-leading profitability.”

Columbia University Business Professor Bruce Greenwald told the New York Times that Alibaba's valuation relative to its earnings is "scary" and that investors attach "lots of hype" to the company's story.

But Brean Capital's Fawne Jiang sees Alibaba as "a core holding in the China Internet space" and expects continued rapid growth.

Alibaba's revenue for the quarter ended September 30 grew 54 percent to $2.74 billion from the year-earlier period, while profit fell 39 percent on higher costs for employee stock compensation.