Is Alibaba expected to transition from "value stocks" to "growth stocks" in an orderly manner?

Source: Pu Yin International

Recently, Alibaba Group Chairman Cai Chongxin announced in a company-wide letter that the planned transition of management positions within the group was completed on September 10th. Cai Chongxin has taken over as Chairman of the Board, and Wu Yongming has been appointed as the Group CEO.

At the same time, the Alibaba Board accepted Zhang Yong's request to step down as Chairman and CEO of Alibaba Cloud. This position will be concurrently held by Group CEO Wu Yongming.

In addition, on September 12th, the newly appointed CEO Wu Yongming issued a company-wide letter, announcing the establishment of two strategic priorities: customer-first and AI-driven.

Future emphasis on technology-driven approach

As one of the veterans within the group, the new CEO Wu Yongming has a strong technical background. He has previously served as the Chief Technology Officer for various important businesses such as B2B, Taobao, and Alipay. He led the creation of the Alibaba Mama platform, pioneered mobile Taobao, and promoted the group's mobile transformation.

The new CEO announced the establishment of two strategic priorities: customer-first and AI-driven.

Based on this, Alibaba Group will increase strategic investments in three types of businesses: technology-driven internet platform businesses, AI-driven technology businesses, and globalized commercial network businesses.

Orderly progress in group transformation, Alibaba needs new changes

In recent years, Alibaba's business has faced numerous challenges. In addition to antitrust issues, its core e-commerce business has been continuously impacted by Pinduoduo and short video live-streaming e-commerce. The previously promising cloud business has also slowed down due to customer adjustments.

Alibaba urgently needs a transformation to bring new hope to the market. It may be too early to judge how much change the management transition can bring at this point, but at least "change" is what the market hopes to see. This could potentially allow Alibaba to transition from a "value stock" to a "growth stock" once again.

Currently, it appears that this long-term transformation is progressing in an orderly manner.

Investment recommendation

Pu Yin International expresses optimism about Alibaba's determination in organizational restructuring this year, which is expected to reinvigorate the group's business vitality.

The "Buy" rating for Alibaba is reiterated, with a target price of HKD 118/USD 121, corresponding to FY24E/25E P/E ratios of 14.3x and 13.9x.

The current stock price of the company corresponds to a P/E ratio of 10.4x FY24E, which is lower than its peers, making it an attractive valuation.