Alibaba will soon be bigger than Wal-Mart, says Wells Fargo

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By Larry Banks

Wal-Mart is currently the largest retailer in the world, but it may not hold that crown for much longer.

Alibaba to take Wal-Mart’s crown

In a note issued on Thursday, Matt Nember and Trisha Dill of Wells Fargo wrote that the Chinese e-commerce giant Alibaba was on its way to the top spot:

Alibaba is the clear eCommerce leader in China, but still stands to gain from overall eCommerce growth in China, market share expansion (e.g., new categories, increased mobile monetization, offline initiatives) and longer-term, international expansion. We estimate BABA will soon be the largest retailer in the world, with much better returns and margins than the current leader: Walmart.

Wells also said that as well as the decent quarterly earnings reported on Thursday, Alibaba managed to dismiss fears over the hiring freeze that were thought to dampen its earnings. But the firm lowered its earnings estimate for 2016 earnings per share to $2.77 from $2.95.

Alibaba Mobile Taobao
Alibaba’s Mobile Taobao.

Alibaba has a lot going for it says Wells, such as a 40% increase in gross merchandise volume, strong growth of active buyers, and growth in mobile revenues.

In terms of the negatives, Wells highlighted the slowing growth of Taobao, its online retail platform. The company has an “outperform” rating on the stock, with the 52-week price target range of $77 to $120.

On Thursday, the stock gained 7.5% to close a $86 per share after the earnings were announced.

Alibaba reported quarterly sales of $2.8 billion, which was up 45% year over year and beat the forecasted sales of $2.6 billion. The Chinese company posted adjusted earnings per share of $0.48, also surpassing expectations of $0.42.

Wal-Mart has a market capitalisation of $250 billion, whereas Alibaba’s is $199 billion.

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