▲ 9988 Analysis｜After Alibaba’s performance, brokerages all cut their target prices. Is the potential increase still 40%?Focus: The pros and cons of buying back more and revitalizing e-commerce strategies
- Brokers have lowered their target prices for Alibaba, and generally still give them a target price of over 100 yuan, which is 40% higher than the current price.
- Strengthen investment in e-commerce business to revive growth strategy, brokerage firms have mixed reviews
- Alibaba plans to expand buybacks and exit non-core investments
Alibaba （09988）
After the third quarter results of the fiscal year were announced, the stock price fell nearly 7% in half a day, to 69.8 yuan at noon. After Alibaba has been under pressure for months, many brokerages have taken the opportunity to lower their target prices, even if their performance is in line with expectations. However, they generally give a target price of more than 100 yuan, and the current price has a potential increase of more than 40%. The latest focus of major banks on Alibaba focuses on the benefits of increased buybacks on shareholder returns, additional investments in Taobao Tmall and international e-commerce businesses, etc.
Alibaba’s revenue last quarter increased 5% year-on-year to 260 billion yuan, broadly in line with expectations. In terms of business, Taobao and Tmall revenue increased by 2% year-on-year, international e-commerce revenue increased by 44%, local life services increased by 13%, Cainiao increased by 24%, cloud business increased by 3%, and large entertainment increased by 18%.
Alibaba has increased the scale of its repurchase plan by US$25 billion, bringing its unused repurchase bullets to US$35.3 billion. It also plans to repurchase no less than 3% of its shares in each of the next three fiscal years and will continue to withdraw from non-core investments.
Major banks’ latest target price for Alibaba
Brokerage firm Alibaba target price investment rating Huizheng 116 yuan ⮕115 yuan to buy Furui 128 yuan ⮕110 yuan to buy UBS 109 yuan ⮕104 yuan to buy Goldman Sachs 118 yuan ⮕102 yuan to buy UOB Kay Hian 102 yuan ⮕100 yuan buy
UOB Kay Hian: The investment community has three major concerns about Alibaba
UOB Kay Hian’s report pointed out that Alibaba’s core Taobao and Tmall had weak growth momentum in the last quarter, while international e-commerce revenue grew by 44%, which was impressive, reflecting the growth of AliExpress by more than 60%. However, the bank took advantage of the latest results to lower Alibaba’s revenue forecast for the current quarter and fiscal year 2025 by 1% and 2%, and lowered its adjusted profit forecast for the lower fiscal year by 5%, reflecting the bank’s bearish view on the growth momentum of local e-commerce and international Cost pressure brought about by high investment in e-commerce and reinvestment in cloud business.
The bank lowered the target price of Alibaba to 100 yuan, which is equivalent to 9.5 times the price-earnings ratio of fiscal year 2025, which is far lower than the historical average of 22 times. It believes that the market currently has three major concerns about Alibaba, including: 1) local e-commerce market share Cannibalized by social e-commerce platforms; 2) Cloud business revenue growth slowed to 3%; 3) High investment adversely affects gross profit margin performance.
UBS: Alibaba’s international e-commerce prospects are neutral, with the focus shifting to Taobao and negative CMR
UBS pointed out that Alibaba’s performance is mixed. The good news includes Alibaba’s announcement to increase its buyback efforts, but additional investment in its core business will lead to a decline in profit prospects. The bank specifically pointed out that even though international e-commerce revenue is growing rapidly, quarterly EBITA losses have expanded, and annual losses are expected to reach 13 billion yuan. In addition, as Alibaba hopes to shift the focus of local e-commerce from Tmall to Taobao, the commission rate will therefore decline, causing the core CMR growth in the coming quarters to underperform the overall GMV (gross merchandise sales value).
The bank expects Alibaba’s EBITA to fall by 4% in fiscal 2025 and lowers its target price by about 5% to HK$104.
Jefferies: Alibaba invests to revive growth
According to the Jefferies report, Alibaba’s Taobao and Tmall businesses remain the industry leader. The company emphasized that it will continue to invest in improving user experience and consumer market share this year, including improving product supply, providing high-quality products at competitive prices, and improving service quality. Su et al. In terms of international e-commerce, Alibaba saw a sharp increase in the number of orders last quarter, and is expected to achieve good growth, especially in the Middle East market.
Jefferies said that Alibaba’s leading e-commerce position has brought strong cash flow, and the expansion of the repurchase plan reflects management confidence, but it lowered the target price from 128 yuan to 110 yuan and maintained a buy rating.
related articles:
9988 Performance | Alibaba Capital Strategy: Repurchasing a net reduction of at least 3% of shares each year in the next three years, no rush to spin off Hema Cainiao, and plans to completely withdraw from traditional physical retail
9988 results | Alibaba’s results fell nearly 7%, revenue increased 5% in the quarter ended December, and adjusted net profit of 47.951 billion yuan met expectations
Editor: Mai Deming
