JPMorgan analyst Alex Yao raised the firm’s price target on Alibaba to $140 from $130 and keeps an Overweight rating on the shares. The analyst sees room for a positive surprise to consensus Q2 estimates on Alibaba’s cost optimization. On-the-ground observations and local news flow suggest a further scale-back of investments by Alibaba over the quarter, Yao tells investors in a research note. As a result, losses from the company’s multiple initiatives, like Taocaicai and local service, may improve more than expected sequentially, says the analyst. Yao expects Alibaba share price upside to be driven by positive earnings revisions, before rotating to multiple expansion when its earnings growth recovers to 20%-plus on a 6-12 months view. He’s more positive on Alibaba’s margin outlook and notes the company remains one of his top picks in the China Internet universe.
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