UBS: Raises Alibaba-W target price to HKD 190, rating "Buy"
UBS released a research report, raising the target price for Alibaba-W from HKD 179 to HKD 190, and simultaneously adjusting the US stock target to USD 195, maintaining a "Buy" rating. The bank predicts that Alibaba's total revenue growth will accelerate to 9% in the first fiscal quarter, with significant growth in cloud business and adjusted EBITA reaching the bottom. Although the e-commerce sector is expected to see a decline in CMR due to weak consumer spending, improvements in core profit margins and the revaluation of AI asset values provide attractiveness for the stock price
According to the Zhitong Finance APP, UBS has released a research report stating that it has raised the target price for Alibaba-W (09988) from HKD 179 to HKD 190, and for Alibaba (BABA.US) from USD 184 to USD 195. The rating remains "Buy."
The bank predicts that Alibaba's total revenue growth in the first fiscal quarter will accelerate to 9%, mainly benefiting from the accelerated growth of its cloud business and the gradual fading of the impact from the separation of first-party businesses. Adjusted EBITA is expected to have bottomed out at RMB 26 billion, but still represents a 34% decline compared to the same period last year.
By business segment, for the China e-commerce group, it is predicted that the GMV of the Taobao Tmall Group (TTG) will remain flat year-on-year due to weak consumer demand. Given that merchant subsidies may increase during the 618 promotion period, customer management revenue (CMR) is expected to decrease by 8% year-on-year. The bank expects the EBITA for the China e-commerce group to be around RMB 37 billion, with instant retail losses narrowing year-on-year to RMB 10 billion, compared to a loss of RMB 18 billion in the previous fiscal quarter. The revenue growth rate for the cloud business is expected to accelerate to 45%, and the EBITA profit margin is also expected to increase to 11%.
The bank pointed out that in the past few quarters, due to the impact of AI and express e-commerce investments, Alibaba's consensus expectations have been continuously revised downwards, leading to underperformance in its stock price. From the perspective of earnings revision, the bank believes that the market's downward adjustment cycle for earnings has passed, and expectations have been adjusted to a lower level, while the core TTG profit margin is improving, express e-commerce losses are narrowing, and cloud business growth is accelerating with improved margins. Against this backdrop, the market is expected to refocus on its highly valuable AI assets and growth story. Following the recent stock price correction, the current price presents an attractive investment opportunity
