As stated in the report of Merrill Lynch, Alibaba's management attached significant attention to the company's long-term prospect. The group's margins and monetization rate continued to be in transition due to the investment in marketing and information technology, together with increasing proportion on mobile GMV. However, Alibaba has a considerable growth in GMW, with a year-on-year increase of 49% in the third quarter. The growth was largely attributable to the continuous growth of active users.
The broker trimmed the company's 2015-2016 operating revenue forecast by 9% and 12%, with 5% fall in operating income. The broker expected that Alibaba's share price will remain volatile in near-term since the share lock-up would expire in mid-March. In addition, it is believed that Alibaba will put more effort on controlling fraudulent products while maintaining a constructive relationship with the authority. Looking forward, Alibaba's margin will be normalized in 2016, alongside the recovery in earnings growth and decreasing share overhang risk. The rating was maintained at Buy and the target price was set at US$116.
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