Wedbush Reiterates On Alibaba, Expects Shares To Maintain A 'Premium Valuation'

Wedbush reiterated its Outperform rating and $115 price target on Alibaba Group Holding Ltd (NYSE: BABA) Thursday.

Analyst Gil Luria believed the stock offers a “compelling combination of size, growth and profitability, on a global basis.”

While Alibaba’s Q3 revenue of $4.219 billion beat Wedbush’s estimate of $4.151 billion, Luria thought Singles Day may have caused unreasonable expectations for investors.

Luria noted that discussion around the stock has begun to focus more on “risk and reward,” however, Luria expected the shares to “hold onto their premium valuation.”

The analyst note mentioned Chinese regulatory concerns over “legitimate merchandise” on Alibaba’s platform. It was expected that the State Administration for Industry and Commerce (SAIC) report on illegal business would have a “muted” impact as long as the regulator did not “take targeted action singling out Alibaba." Despite some reduction in supply, "growth will continue" and the "process will track similar efforts by eBay and Amazon over the last 10 years."

The firm raised its FY 2015 EPS estimates from $2.21 to $2.31 on better-than expected margins and based the price target on 38x the FY 2016 estimated EPS of $3.03.

Alibaba recently traded at $89.71, down 8.8 percent.