GOLDMAN: Buy Alibaba

Alibaba jack maREUTERS/Herbert TsangJack Ma, chairman and founder of Alibaba.com, attends his firm’s launch ceremony at the Hong Kong stock exchange November 6, 2007.

After Alibaba’s better-than-expected earnings report on Thursday, Goldman wants clients to buy Alibaba.

In a note Friday, Goldman upgraded Alibaba to “Buy” from “Neutral,” with a 12-month price target of $US98.

The price represents a 14% upside potential from Thursday’s closing price of $US86.

“4QFY15 earnings have increased our confidence on the growth outlook of the business, as well as its cost management. We believe mobile growth, rising monetisation rates, stable margins, Beijing’s broader consumption push, and MSCI inclusion should reward investor confidence.”

On Thursday morning, the Chinese e-commerce company reported quarterly sales of $US2.8 billion, up 45% year-over-year, and better than the forecast for sales of $US2.6 billion. The company posted adjusted earnings per share of $US0.48, also topping expectations for $US0.42.

Alibaba shares were about 1% higher in pre-market trading Friday, after closing 7.5% higher on Thursday.

In their upgrade, Goldman noted the increase in Gross Merchandise Volume (GMV), or the total money value of goods sold through the online marketplace within a particular period. They noted that GMV grew 46% in the 2015 fiscal year.

Alibaba’s revenues from mobile made a huge contribution, up 350% year-over-year, and accounted for nearly half of the company’s total sales. Goldman noted that the growth of China’s wireless infrastructure is a positive for Alibaba.

On Thursday, Alibaba also announced that COO Daniel Zhang would replace Jonathan Lu as CEO.

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