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BABA

Alibaba

$173.79

-0.67 (-0.38%)

, JD

JD.com

$42.15

0.89 (2.16%)

11:28
08/23/17
08/23
11:28
08/23/17
11:28

MKM Partners bullish on Chinese e-commerce companies

MKM Partners was upbeat on two Chinese e-commerce companies today, upgrading JD.com (JD) to Buy from Neutral and raising its price target on Alibaba (BABA) to $220 from $177. JD A BUY: JD.com shares have retreated due to worries about the company's margins and competition, according to MKM analyst Rob Sanderson. However, the Chinese e-commerce market is large enough to support two strong players, and JD should benefit from strong consumption trends and the robust growth of e-commerce in China, he stated. Although JD.com has historically had low margins, its gross margins are starting to rebound, enabling it to begin to reach "sustained profitability," Sanderson wrote. Despite the fact that JD.com offered significant discounts in the second quarter, its gross margins from direct sales rose by more than 0.5 percentage points, according to Sanderson, who expects the company's gross margins to rise 0.1 percentage points this year, 0.2 percentage points in 2018, adding that these estimates are "conservative." With 260M active customers, JD.com has sufficient scale to succeed, and its direct sales to consumers differentiate it from Alibaba, which uses a third party model, according to Sanderson. MKM's surveys have found that 20% of Chinese consumers prefer the direct sales model. He raised his price target on the shares to $51 from $33. ALIBABA: Proclaiming that the company has the best fundamentals of "all mega-cap Internet stocks," Sanderson raised his estimate of the company's e-commerce business growth this year to 50% from his previous estimate of a 47% increase. The company is benefiting from its 60% margin, "strong secular trends, and dominant market position," according to Sanderson. Additionally, the analyst says that the company's markets appear to be accelerating, while its traffic growth and personalization are enabling it to improve its monetization significantly. Moreover, Sanderson is upbeat on the company's cloud business, saying that the move to the cloud is at an earlier stage in China than in the U.S. and that there may be less competition among cloud vendors in China than in the West. Finally, Sanderson thinks that the company should benefit from the growth of e-commerce in Southeast Asia, which is just beginning, while it may boost its results by selling more ads. He kept a Buy rating on the stock. PRICE ACTION: In morning trading, JD.com rose 1.8% to $42.90 and Alibaba slipped 0.25% to $174. The latter stock reached a new all-time high of $176.23 earlier in the session.

BABA

Alibaba

$173.79

-0.67 (-0.38%)

JD

JD.com

$42.15

0.89 (2.16%)

BABA Alibaba
$173.79

-0.67 (-0.38%)

08/23/17
MKMP
08/23/17
NO CHANGE
MKMP
Alibaba price target raised to $220 from $177 at MKM Partners
MKM Partners analyst Rob Sanderson increased his price target on Alibaba after the company reported stronger than expected Q2 results. The analyst says the company has "strong secular trends" and a "dominant market position." He keeps a Buy rating on the shares.
08/22/17
08/22/17
UPGRADE

On The Fly: Top five analyst upgrades
Catch up on today's top five analyst upgrades with this list compiled by The Fly: 1. Alibaba (BABA) upgraded to Overweight from Neutral by Atlantic Equities analyst James Cordwell, who said the company's Q1 report "clearly demonstrated" how Alibaba can leverage its scale to gain e-commerce share. The recent strong execution likely also builds confidence in the company's ability to execute on other long-term opportunities, such as international expansion, omnichannel retail, and the cloud. 2. VMware (VMW) upgraded to Buy from Hold at Deutsche Bank with analyst Karl Keirstead citing growing evidence that large enterprises are embracing a hybrid model, which reduces his view of the risk to VMware from the threat of adoption of the cloud and Amazon Web Services (AMZN). His recent checks indicate that VMware technology is proving more durable than he would have thought 12-18 months ago. 3. Estee Lauder (EL) upgraded to Buy from Hold at Argus with analyst John Staszak telling investors the company continues to benefit from strong demand for high-end beauty products. 4. Tempur Sealy (TPX) upgraded to Buy from Hold at Stifel. Analyst John Baugh said he's surprised how quickly the company has recovered from the loss of its deal with Mattress Firm, as Tempur Sealy's margins are exceeding expectations and its direct business is growing more quickly than expected. 5. 58.com (WUBA) upgraded to Buy from Hold at Deutsche Bank, with analyst Alvin Jiang saying the company's quarterly earnings proved the company's strong execution regardless of macro volatility. This list is just a portion of The Fly's full analyst coverage. To see The Fly's full Street Research coverage, click here.
08/22/17
ATLE
08/22/17
UPGRADE
Target $215
ATLE
Overweight
Alibaba upgraded to Overweight on e-commerce share gains at Atlantic Equities
As previously reported, Atlantic Equities analyst James Cordwell upgraded Alibaba to Overweight from Neutral, saying the company's Q1 report "clearly demonstrated" how Alibaba can leverage its scale to gain e-commerce share. The recent strong execution likely also builds confidence in the company's ability to execute on other long-term opportunities, such as international expansion, omnichannel retail, and the cloud, Cordwell tells investors. He raised his price target on Alibaba to $215 from $130, saying he sees the stock's valuation as reasonable despite its strong performance year-to-date.
08/22/17
ATLE
08/22/17
UPGRADE
ATLE
Overweight
Alibaba upgraded to Overweight from Neutral at Atlantic Equities
JD JD.com
$42.15

0.89 (2.16%)

08/23/17
08/23/17
UPGRADE

On The Fly: Top five analyst upgrades
Catch up on today's top five analyst upgrades with this list compiled by The Fly: 1. Rockwell Collins (COL) upgraded to Buy from Hold at Vertical Research by analyst Robert Stoddard, as he believes there remains the possibility of the company being acquired. As detailed in colleague Jeff Sprague's related report United Technologies (UTX), the two analysts cannot rule out United Technologies making a bid for Rockwell Collins. They believe it could be more exotically structured as a Reverse Morris Trust, which would make a transaction more financially appealing to United Technologies shareholders, while preserving its credit rating, and providing Rockwell Collins shareholder with a decent premium. 2. JD.com (JD) upgraded to Buy from Hold at MKM Partners by analyst Rob Sanderson based on valuation and his belief that Chinese e-commerce is powerful enough to support "a strong number two," while the company's "position" is "sustainably differentiated." 3. IDEXX (IDXX) upgraded to Buy from Neutral at BofA/Merrill by analyst Derik De Bruin, who said new data supports 10% long-term organic revenue and 15%-20% earnings CAGRs through 2022 driven by higher diagnostic utilization by the installed base, new product ramps, and further innovation. The analyst said the pullback since the solid Q2 report provides a buying opportunity for this "top dog." 4. Intuit (INTU) upgraded to Equal-Weight from Underweight at First Analysis by analyst James Macdonald, who raised his price target to $128 from $102 following the "strong" quarter and better than expected 2018 guidance driven by Small Business growth. 5. G-III Apparel (GIII) upgraded to Overweight from Neutral at Piper Jaffray by analyst Erinn Murphy to reflect the recent pullback in shares and maintained a $27 price target. The analyst expects wholesale trends to "fuel upside" and believes the new DKNY product is checking well at retail. To see The Fly's full Street Research coverage, click here.
08/23/17
MKMP
08/23/17
UPGRADE
MKMP
JD.com upgraded on valuation, positive outlook at MKM Partners
As noted earlier, MKM Partners upgraded JD.com to Buy from Hold. Analyst Rob Sanderson upgraded the stock based on valuation and his belief that Chinese e-commerce is powerful enough to support "a strong number two," while the company's "position" is "sustainably differentiated." He is upbeat on macro trends that affect the company and says it can increase its margins. Target $51.
08/23/17
MKMP
08/23/17
UPGRADE
MKMP
Buy
JD.com upgraded to Buy from Neutral at MKM Partners
08/15/17
JPMS
08/15/17
NO CHANGE
Target $55
JPMS
Overweight
JD.com price target raised to $55 from $48 at JPMorgan
JPMorgan analyst Alex Yao raised his price target for JD.com to $55 saying he remains positive on the company's margin expansion outlook, despite quarterly fluctuation. The analyst attributes the "seemingly low" margin in Q2 to seasonal promotional efforts and the one-time impact from logistic cost reclassification. Yao expects JD.com's "strong momentum" to continue in the rest of this year and keeps an Overweight rating on the shares.

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