Online retail sales in China are off to a strong start for the year, creating upside potential for e-commerce leader Alibaba (BABA).
China’s National Bureau of Statistics on Wednesday reported online retail sales in the country reached $205.8 billion for the first two months of 2018. That’s up 37% from the year-ago quarter and an acceleration from the 32% growth in the same period a year ago. Online sales growth also saw a slight acceleration from fourth-quarter levels despite a strong holiday shopping season.
“This suggests a healthy start to the year for Chinese retail sales, creating upside potential for Alibaba’s revenue growth,” wrote Baird analyst Colin Sebastian in a research note to clients. Baird has an outperform rating on Alibaba and a price target of 220.
Alibaba shares gained 2.2% to close at 192.56 on the stock market today.
Alibaba’s closest competitor in the e-commerce space is JD.com (JD). Amid stiff competition from Alibaba and large investments in new projects, JD.com recently reported weaker-than-expected earnings for its fiscal fourth quarter. JD.com revenue in the quarter rose 39% from the year-ago period to $16.9 billion.
JD.com shares on Wednesday dipped 0.5% to 44.09.
JD.com is the largest internet company in China by revenue. While Alibaba is smaller by revenue, it handles more e-commerce.
Sebastian said significant growth opportunities remain beyond Alibaba’s core China retail business. In addition to Alibaba’s New Retail strategy, which includes a major expansion into physical stores, Alibaba is investing heavily in a number of other nonretail initiatives. This includes its rapidly expanding cloud-computing services business.
Alibaba, on Feb. 2, reported its fastest revenue growth in at least 15 quarters for its fiscal third quarter, but earnings fell short of estimates. Revenue soared 56% to $12.8 billion.
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