UBS AG (NYSE:UBS) pegs an upside scenario for Alibaba Group Holding Ltd (NYSE:BABA) to be at $136 per share, it was revealed in an interview with Eric Sheridan, managing director of UBS AG, on CNBC.
The UBS AG (NYSE:UBS) executive was explaining why his company initiated coverage on Alibaba Group Holding Ltd (NYSE:BABA) with a Buy rating when he was asked why UBS sees the Chinese electronic commerce giant to possibly go to $136 per share.
“[…] to the upside scenario, what we highlighted in the report is obviously faster-than-expected growth [and] continued strength in EBITDA margins. Alibaba is actually one of the most profitable companies in the globe in terms of the model they have today,” he said.
These factors including the duopoly Alibaba Group Holding Ltd (NYSE:BABA) and JD.Com Inc (ADR) (NASDAQ:JD) have in China fuels the estimate for the upside UBS AG (NYSE:UBS) presented for the recently-listed company. This duopoly may sustain over the next five years, Sheridan said.
Furthermore, he noted that they see a lot of growth in China still for Alibaba Group Holding Ltd (NYSE:BABA) and JD.Com Inc (ADR) (NASDAQ:JD). He said that only half of China’s population are online. Less than 55% of those who have internet access have utilized electronic commerce, he added. Furthermore, electronic commerce as a part of overall commerce in the country is still only in the “high single digits,” he said.
Nonetheless, it should be noted that UBS AG (NYSE:UBS) also presented a $55 downside for Alibaba Group Holding Ltd (NYSE:BABA). Sheridan said that this downside scenario can be supported by concerns in the macro state of the e-commerce industry and the questions about the corporate governance of the company particularly the control of Jack Ma, the company’s founder, over the share structure of the company and its listing structure.
UBS AG (NYSE:UBS) shareholders includes Ken Fisher’s Fisher Asset Management which reported about 39.17 million shares in the company by the end of the second quarter.
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