Wall Street Interprets Alibaba Cloud's Spin-off Listing: A Key Surprise for Stock Prices! But...

Last night, Alibaba released a mixed financial report: although the quarterly revenue exceeded expectations and net profit increased by 38% year-on-year, international business, Cainiao, and local life all showed strong growth, but the core domestic e-commerce business and cloud business strongly linked to artificial intelligence (AI) both saw a year-on-year decline in revenue.

As a result, Alibaba's stock price came under pressure, with overnight US stocks and today's stocks both falling by more than 5%.

However, compared to the relatively dry financial figures, what the market is most concerned about this time is actually Alibaba's previous announcement of the "1+6+N" major spin-off progress.

This time, Alibaba was very generous and directly clarified the financing and listing timetable for Alibaba Cloud, Cainiao, and Hema: Alibaba Cloud Intelligence Group plans to complete its listing within the next 12 months, Hema within the next 6 to 12 months, and Cainiao within 12 to 18 months.

In response, many Wall Street banks have called it a "pleasant surprise" and expressed optimism about Alibaba's move.

Morgan Stanley was the first to say that Alibaba's announcement of spin-off and clear IPO timetable was "a key, positive surprise", indicating that Alibaba, as an investment case, is transforming from a market-share-losing e-commerce platform to a sizable cash cow, which is expected to become a catalyst for Alibaba's stock price to rise.

Similarly, Daiwa Securities believes that Alibaba's restructuring plan will release business value. The spin-off of the loss-making cloud business may increase the profit margin of Alibaba's remaining e-commerce business. As the company will raise additional funds from external sources of its many subsidiaries, it is expected to further repurchase shares and complete the current $19.4 billion repurchase plan.

However, it is worth noting that some investment banks have different interpretations of Alibaba's complete separation from Alibaba Cloud.

HSBC Research pointed out that Alibaba's restructuring activities may release the value of certain business departments, but the potential comprehensive spin-off of cloud business also raises questions, as cloud computing and international business are seen as long-term growth drivers for Alibaba Group. That is to say, Alibaba Cloud's independence may have an impact on the overall group.

Nomura was more direct in expressing its confusion, believing that Alibaba Cloud's spin-off plan is "bold and puzzling".

First of all, Nomura said that investors would appreciate Alibaba's spin-off behavior, just like Tencent's "abandonment" of Meituan-W and JD.com, which has been proven to be helpful to the stock price.

However, a key difference between Alibaba Cloud's spin-off and Tencent's "dividend reduction" of Meituan-W and JD.com is that the minority equity of Meituan-W and JD.com was obtained by Tencent early on and was later reclassified from strategic investment to financial investment, which led to the decision to abandon them. But Alibaba Cloud is Alibaba's own business, despite the recent slowdown in growth over the past few quarters. But it is still one of the long-term driving forces of the group.

Therefore, the bank is puzzled as to why Alibaba decided to completely divest from Alibaba Cloud, rather than at least retaining a minority stake.

However, the bank still acknowledges that the future stock dividends supported by Alibaba Cloud stock look attractive. Based on the bank's current valuation of Alibaba Cloud at $31 billion, the implied cash yield is 13%.