In their report, the Merrill Lynch team focuses much of the work on the impact that Alibaba will have on the current reigning powers for e-commerce on the Internet. Plus, they highlight the impact the company will have on Internet sales outside the United States. Here are the companies that may see some headwinds from this emerging powerhouse, and two that will benefit.
Amazon.com Inc. (NASDAQ: AMZN) is a top stock to buy at Merrill Lynch. The team, like many Wall Street analysts, view Amazon as the innovation leader and a top stock to own for 2014 and beyond. In addition to its online retailing muscle, Amazon has a gigantic cloud storage business that continues to dominate rivals. The company will add even more revenue to the top line with the recent increase in its Amazon Prime memberships, and other initiatives for video and music streaming. With a small part of the Chinese total sales, the company will look to expand its CBT to battle and hopefully extract share from Alibaba. The Merrill Lynch price target for the stock is $420. The Thomson/First Call consensus target is at $419.33. Amazon closed on Tuesday at $307.19 a share.
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eBay Inc. (NASDAQ: EBAY) is continuing improvements in the user experience. eBay’s marketplaces keep attracting new users, evidenced by double-digit growth in active users and items sold. Sales growth in eBay’s Fixed-Price format have accelerated nicely to +22% year-over-year in March from a +16% year-over-year number posted in February. The numbers continued to trend up in April and May. The Merrill Lynch research piece noted that CBT is an important driver of eBay’s sales, as CBT transactions represented close to 20% of eBay gross merchandise volume and 25% of PayPal’s third-party verification in 2013 (although they estimate 25% of eBay’s CBT and just 6% to 8% of eBay’s total revenue is China related). The Merrill Lynch price target for the stock, which is rated Buy, is $65. The consensus target is $61.75. The stock closed Tuesday at $50.42.
SoftBank Corp. has two transactions that could prove to be huge. Its impending sale of part of its gigantic 37% ownership in Alibaba continues to be a jump-ball, as there seems to be some confusion on Wall Street on just how much the company will sell. The company has also seen chatter increase on a possible merger of Sprint, which they own, and T-Mobile. One thing is for sure, investors looking to have Chinese and Asian Internet exposure, combined with a large telecom holding, may do outstanding by picking up shares of the stock. The consensus price target for SoftBank was not posted. The over-the-counter stock closed Tuesday at $37.37.
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Yahoo! Inc. (NASDAQ: YHOO) operates the most visited website in the world, but the company comes in a distant third in the core search market with 10% in April, which was down one-tenth of 1%. CEO Marissa Mayer has made expanding and increasing the company’s search number a big priority. Yahoo investors are waiting for the highly anticipated Alibaba IPO. It will be a large payday for the company, as it owns a huge chunk of the Chinese Internet giant. Investors are betting that Yahoo shares will rebound from the sell-off that swept technology stocks this year after it receives as much as $10 billion after taxes from the Alibaba IPO. Yahoo shares are rated Buy at Merrill Lynch, and the price target is posted at $43. The consensus target is $42.26. The stock closed Tuesday at $34.65.
The Alibaba deal was significant in more ways than one, as Wall Street banks were able to persuade the company to hold their IPO in the United States, as opposed to Hong Kong. The intense impact of Internet cross border trade will continue to draw interest and investment long after this deal has been put to bed. The coming changes in worldwide e-commerce will expand and open markets previously hard to reach, and that means even more revenue for the e-commerce giants.
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