Wedbush Managing Director Gil Luria is defending his firm’s Alibaba Group Holding Ltd (NYSE:BABA) price target of $115 per share.
In an interview with CNBC, Luria discussed why Wedbush stands firm on its high Alibaba Group Holding Ltd (NYSE:BABA) price target. Furthermore, he discussed the reported $200 million investment of the Chinese electronic commerce giant in Snapchat.
“We’re sticking with [the $115 price target]. The comparable groups to Alibaba is very small. […] In fact, you can count them on your one hand that have this market cap, 30% plus growth, [and] 50% plus margins. It’s really Facebook, Tencent, Baidu and Alibaba,” Luria said.
Among the four, the Wedbush Managing Director said that he would pick Alibaba Group Holding Ltd (NYSE:BABA).
“Among that group, they usually trade in the range of high 20s multiple to 40s times. I’d argue that Alibaba has the best business of that four and so in my mind, they should trade at the high end of that multiple range, closer to 40 times. At 38 times, I get $115 [and] we fully stand behind that,” Luria added.
Meanwhile, Alibaba Group Holding Ltd (NYSE:BABA)’s investment in Snapchat will not only benefit the Chinese company, it will also benefit Snapchat. Luria said that the internet commerce giant has a lot of experience integrating commerce with social and that’s why Snapchat will likely get a boost in value from the investment not only because of the money involved. Luria added that social integration of e-commerce is more developed in China than in the U.S.
Luria also said that the investment in Snapchat, if it is true, will not move the needle on Alibaba’s share price at the moment. This investment, however, is part of a longer-term strategy for the company.
Wedbush initiated coverage on Alibaba in September last year. The company reiterated its $115 price target and Outperform rating on the stock just by the end of January.
Dan Loeb’s Third Point owned 10 million Alibaba Group Holding Ltd (NYSE:BABA) shares by the end of 2014.
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