With eCommerce up 25% online sales now accounts for a quarter of China’s total retail
China’s online sales of physical goods continued their relentless march higher last month, with a 25% year-over-year gain, according to data from the country’s National Bureau of Statistics. That’s up from a 22% increase in May and a 16% rise in April. Indeed, online sales in the entire second quarter jumped about 21% from the year-ago period, up from a 6% gain in the first quarter.
E-commerce accounted for a full quarter of China’s total retail sales last month, up from a fifth at the end of 2019, “suggesting meaningful online share gains occurred over the past six months,” Analyst Scott Devitt writes. Categories like cosmetics, beverages, tobacco, and alcohol made big strides.
“Overall, we believe macro concerns remain but view China e-commerce as well positioned to gain share of retail dollars with the potential for more permanent shifts in consumer buying behavior in certain categories in favor of online players,” he said.
That should be a positive for Alibaba’s results for the second quarter, due out in August. Devitt believes that the company will log revenue growth of 31.5% year over year, while the average of analysts’ calls points to a 28.6% increase. That boosts Devitt’s confidence in his bullish view of the stock, despite other risks.
Investing in China-focused stocks isn’t without its risks, but in the case of Alibaba Group Holding, it is worthwhile, says Stifel.
Analyst Scott Devitt reiterated a Buy rating on Alibaba (ticker: BABA) on Friday and added $40 to his target for the stock price, lifting it to $270. Alibaba is up 16% year to date and was up 1.6% to $246.46 in morning trading.
He believes that perceived political risks in the region are on the rise, and that investors should keep that in mind. At the same time, though, he says it is impossible to ignore the impressive strides in China’s e-commerce fundamentals, which will likely continue to propel the stock higher.
