Oppenheimer Thinks Alibaba SEC Probe Already Priced In

The market may not have known about the SEC’s investigation of Alibaba Group Holding Ltd BABA 3.65% until the company’s recent disclosure, but the market may very well have priced in the issues a long time ago. According to Oppenheimer analyst Jason Helfstein, the elements of Alibaba’s business that the SEC is looking into have long been points of uncertainty for investors, and may have been holding back Alibaba’s stock for quite some time.

The SEC investigation is reportedly focused on three elements: 1) consolidation practices for minority holdings, 2) related-party transactions and 3) non-GAAP Singles Day reporting metrics such as gross merchandise volume (GMV). Helfstein expects Alibaba to provide some clarity on the first two elements during the company’s Investor Day period starting on June 13.

Helfstein notes that, while Alibaba’s GMV metric may not have accounted for “fake” orders that sellers use to improve their rankings on Alibaba’s platform, Alibaba’s definition of GMV doesn’t impact on the company’s bottom line.

“While it is possible that 20-30% of transactions on BABA’s retail platform could be sellers ‘buying their own product’ to inflate their product rank higher, this would hae no impact on revenue, as it would mean the take rate is closer to 4% vs. last year’s 2.6% (but still well below AMZN at ~13%),” Helfstein explains.

“With the stock trading at 24x/17x F17/F18 P/E multiples and growing at 30% CAGR, we believe…

Click here to continue reading

Want to learn more about how to profit off the stock market? Or maybe you just want to be able to look sophisticated in front of your coworkers when they ask you what you are reading on your Kindle, and you’d prefer to tell them “Oh, I’m just reading a book about stock market analysis,” rather than the usual “Oh, I’m just looking at pics of my ex-girlfriend on Facebook.” For these reasons and more, check out my book, Beating Wall Street with Common SenseI don’t have a degree in finance; I have a degree in neuroscience. You don’t have to predict what stocks will do if you can predict what traders will do and be one step ahead of them. I made a 400% return in the stock market over five years using only basic principles of psychology and common sense. Beating Wall Street with Common Sense is now available on Amazon, and tradingcommonsense.com is always available on your local internet!