Alibaba & 4 Internet Commerce Peers To Buy Today
Zacks Investment Research | Jun 29, 2017 10:17PM ET
Alibaba (NYSE:BABA) is one of the hottest stocks today with its huge share of one of the largest markets globally, a market where consumers are increasingly turning to online channels to purchase quality products and global brands. Yes, China is Alibaba’s greatest strength and serving the Chinese customer is what has taken the company to the top.
Earlier this month, CEO Jack Ma told investors that the company would be the world’s fifth largest economy by 2035. It seems like a fantastic dream or an unachievable goal until you consider how well the company is entrenched in China, which will account for a big chunk of the increase in consumption over the next few years.
But the company isn’t resting on its laurels either. Because it isn’t just China but also other Asian markets that will see a rise in online shoppers. This prompted it to invest in Lazada, a Singapore-based ecommerce company founded by German company Rocket Internet. For a billion dollars, Alibaba increased its stake in Lazada from 51% to 83%, making it the largest shareholder. Lazada has operations across Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam. It has 23 million active buyers plus a subscription based membership program called LiveUp that offers rewards and promotions from brands including Netflix (NASDAQ:NFLX), Uber, UberEATS, RedMart and Taobao Collection. In India, another big ecommerce market with several local players, Alibaba has bought stakes in these players, possibly preparing the road for a full-blown entry at a later date.
Having been around long enough to establish logistical relationships through Cainiao, payments processing through Ant Financial and a solid core commerce model, Alibaba has been guzzling data that it is in an increasingly better position to use for improving customer experience and feeding its AI initiatives.
As far as the non-commerce business is concerned, there have been recent developments with respect to Alipay and Alicloud.
Ant Financial, which runs Alipay, has a total of 450 million active users and processes 170 million transactions per day. The company recently entered into relationships with tour bus operator City Sightseeing and Peach Payments, so Chinese customers in South Africa can pay for services using Alipay. South Africa reportedly saw a 96% increase in Chinese tourists last year. Its May 2017 agreement with credit card processing service First Data Corp will allow Chinese tourists to use Alipay across 4 million U.S. stores. In December last year, it teamed up with European banks BNP Paribas (PA:BNPP), Barclays (LON:BARC), UniCredit, and SIX Payment Services to get more merchants to accept Alipay, thus helping Chinese tourists to the region.
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Alicloud, which grew 103% in the last quarter, is also seeing enhancements. Alibaba is in the process of negotiations with ZTE for the purchase of its telecom geer-making subsidiary ZTEsoft Technology Co. Bloomberg says that Alibaba may spend 2-3 billion yuan or around $300 million on the transaction for ZTEsoft’s global client portfolio and relationships with European and African wireless carriers. Alibaba also recently joined Facebook’s Open Compute Alliance as a Platinum member. Alicloud is growing in leaps and bounds and is likely to emerge as a major player in a market currently dominated by Amazon (NASDAQ:AMZN) , Microsoft (NASDAQ:MSFT) and others.
All these factors are likely to have played a role in the very strong revenue targets management set for the year. Accordingly, management currently expects that ecommerce, cloud, digital media and entertainment, and of course international expansion will contribute to revenue growth of around 45-49%, or over $34 billion this year. Gross merchandise volume (GMV) is also expected to double in the next three years from $547 billion in fiscal 2017 to a trillion dollars by 2020.
Alibaba’s current revenue estimates represent more than 45% growth in the Jun 2017 and Sep 2017 quarters. Revenue estimates represent 46% growth in 2018 and 33% growth in 2019. Earnings estimates represent 37% growth in the March quarter, 21% growth in the June quarter, 46% growth in fiscal 2018 and 38% growth in 2019. The company topped earnings estimates in three of the last four quarters at an average rate of over 20%.
Alibaba sports a Zacks Rank #1 (Strong Buy).
Alibaba may be particularly hot right now, but the sector itself is also worth considering. Here are brief highlights of some other picks:
Autobytel (NASDAQ:ABTL)
Autobytel is an internationally known online automotive commerce company with Internet sites for new and pre-owned vehicle information and automotive services that link buyers and sellers in an information-rich environment. Its web sites allow consumers to research pricing, specifications and other information regarding new and pre-owned vehicles and purchase, finance, lease, insure, sell or maintain their vehicles.
The company’s sales estimates represent an 18% and 12% year-over-year increase in the June and September quarters, respectively. Revenue is expected to grow a respective 17% and 14% in 2017 and 2018. Earnings estimates represent declines through 2017 and a return to growth in 2018. The company topped earnings estimates in each of the last four quarters at an average rate of 42%.
Autobytel carries a Zacks Rank #1.
JD.com (NASDAQ:JD)
JD.com operates as an online direct sales company in China. The company, through its Website www.jd.com and mobile applications offers a selection of products including computers, mobile handsets and other digital products; home appliances; automobile accessories; clothing and shoes; luxury goods including handbags, watches and jewelry; furniture and household products; cosmetics and other personal care items; food and nutritional supplements; books, e-books, music, movies and other media products; mother and childcare products; toys, sports and fitness equipment; and virtual goods. JD.com, Inc. is based in Beijing, China.
Like Alibaba, JD is also looking to expand internationally. Just last week it announced an intention to invest $397 million to become a leading stakeholder in global fashion site Farfetch. The companies will also partner on marketing, logistics and technology to take the Farfetch brand to China. JD founder and CEO Richard Liu is joining Farfetch’s board.
Current sales estimates for the June and September quarters represent 31% and 27% growth from the respective quarters last year. 2017 and 2018 sales are expected to grow more than 27%. Earnings are expected to grow 160% in the September quarter, 120% in 2017 and 500% in 2018. The company topped earnings estimates in two of the last four quarters at an average rate of 83.5%.
JD.com carries a Zacks Rank #1.
PetMed Express (NASDAQ:PETS)
Petmed Express is America's largest pet pharmacy, delivering prescription and non-prescription pet medications and health and nutritional supplements for dogs and cats at competitive prices direct to the consumers through its 1-800-PetMeds toll free number and on the Internet.
Revenue estimates for the next two quarters and fiscal years represent single-digit growth from last year. Earnings estimates for the June and September quarters represent 25% and 10% growth while for fiscal 2018 and 2019, growth rates are expected to be 7% and 14%, respectively. The company topped earnings estimates in two of the last four quarters at an average rate of 9.3%.
Petmed Express carries a Zacks Rank #1.
Stamps.com (NASDAQ:STMP)
Stamps.com provides easy, convenient and cost-effective Internet -based services for mailing or shipping letters, packages or parcels anywhere in the United States and at anytime. Their core mailing and shipping services are designed to allow individual consumers or employees of small businesses or larger enterprises to select a carrier, print US postage or shipping labels from multiple carriers, schedule a pick-up, track a package and apply enterprise-wide business rules to manage and account for mailing and shipping costs.
Revenue is expected to be up 18% in the June quarter and 12% in the September quarter. 2017 and 2018 revenues are expected to be up 17% and 14%, respectively. Earnings are expected to be down this year before rising again in 2018. The company topped earnings estimates in each of the last four quarters at an average rate of 42%.
Stamps.com carries a Zacks Rank #2 (Buy).
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