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Alibaba Is 'Well-Girded' To Dominate, Deutsche Bank Lifts Target To $138

BABA | September 29, 2016

Citing rising valuation of Ant Financial, of which Alipay is a part, and valuation roll over into 2017, Deutsche Bank maintains its Buy rating on the shares of Alibaba Group Holding Ltd (NYSE: BABA). The firm lifted its price target to $138. Deutsche Bank said it is of the view that Alibaba is well girded to dominate.

Alipay: Customers' Delight

The firm's analyst Alan Hellawell said, based on a survey, Alipay ranks as the No. 1 online payment method, accounting for 40.8 percent of all online transactions and 37.4 percent of O2O consumption. And more importantly, customers expressed intentions of expanding usage of Alipay. Contrary to the earlier view that Alipay will lose share to rivals, the analyst is now positive.

Evolution Of Alipay

Deutsche Bank noted that Alipay has evolved from a mere payment platform to operating multiple services such as wealth management through Yu'E Bao, credit rating through Sesame Credit, consumer financing through Ant Check Later and insurance.

The firm believes Alipay's share of Ant's P&L will drop to 43 percent in 2017 from 70 percent in 2014. Accordingly, the firm expects ancillary financial services to drive growth over the next several years.

Expectations From Ant Financial

Deutsche Bank expects a 48 percent CAGR for revenues from the calendar year 2017 to 2020. For 2017, the firm estimates 23 percent growth, as improved monetization is offset by continued subsidies. The firm also expects Ant to contribute 2–3 percent to Alibaba over the next few years.

At time of writing, Alibaba shares were down 3.31 percent at $105.17.

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