Alibaba Is On Path To Fundamental Improvement: Analyst

Benchmark analyst Fawne Jiang reiterated Alibaba Group Holding Limited BABA with a Buy and a $180 price target.

China retail and physical goods were off to a slower start in the September quarter, with a moderately improving trend month by month. 

Consumption generally appears resilient, yet consumers remain rational/cautious about spending. Purchase shifts prioritizing experience (travel, movie and theatre, restaurant) over physical goods may have also played a factor. 

With industry growth expected at a high single-digit Y/Y, Jiang estimated BABA CMR to grow at 4% Y/Y (vs. 5% Y/Y prior) in the September quarter and have moderately lowered 2Q24 revenue estimate to RMB 225.4 billion (vs. RMB 228.1 billion prior). 

Also Read: What’s Going On With Alibaba Stock Today?

Jiang left her adjusted EBITDA estimate unchanged at RMB 48.4 billion, reflecting BABA’s continued efficiency improvement. 

Fundamentally, Jiang wanted to highlight BABA’s consistent effort on a user-centric approach and its notable advertising system upgrades (Wanxiang Boundless) in the quarter, leveraging AI capability. 

While Jiang is realistic that these product upgrades may take time to ramp up and translate into meaningful growth reacceleration, she is encouraged to see the positive take rate trend (outperforming GMV growth). BABA is on the path to a fundamental improvement.

Jiang projects FY24 revenue and EPS of $133.17 billion vs. consensus $131.94 billion (prior $$133.54 billion) and $8.72 vs. consensus $9.11 (prior $$8.71).

Price Action: BABA shares traded higher by 2.98% at $87.39 on the last check Tuesday.