Alibaba Top Pick, Analyst Raises Estimates as Growth Rebounds, Logistics Simplifies After FY24

Reference point Analyst Fawn Jiang reiterated the purchase Alibaba Group Holding Limited (NYSE: BABA) with a target price of $180.

Jiang sees BABA stock as the best choice for a large-cap value game in China in 2023.

Overall, while retail and e-commerce growth remained subdued in the December quarter, Jiang expects the industry’s fundamental tipping point to arrive by the June quarter (F1Q24) with growth forecast to pick up again in FY24.

In the December quarter, growth in retail and e-commerce faced mounting pressure, which was first compromised by blatant logistics disruptions due to growing lockdown coverage, and then undermined by a lack of delivery capacity as staff battled infections.

Retail sales in China suffered in October and November, down 0.5% y/y and 5.9% y/y, respectively, according to NBS. E-commerce for physical goods has slowed down noticeably due to counter macroeconomic factors and disruptions in logistics.

For BABA in particular, Jiang’s checks suggest a modest slowdown in GMV growth compared to the September quarter by about a mid-single-digit decline year-on-year.

Demand showed a modest recovery in December, driven mainly by strong growth in the food and beverage, fresh food and non-health FMCG segments. However, the number of cancellations remains high due to disruptions in logistics caused by a lack of delivery capacity.

The analyst expects logistical disruptions to ease, as evidenced by an improvement in the situation in major cities. On the contrary, there may be some increasing pressure in lower-tier regions as Chinese New Year holiday travel could boost nationwide distribution and a sliding effect could emerge during the March quarter.

From a valuation standpoint, with sector overbalances to be eliminated, the analyst predicted a reset in the risk profile for the platform economy in China, which should allow for multiple expansion and eventually lead to a higher valuation of the sector.

Despite the recent rally, the stock trades at P/E ex 8.2x ahead. net cash and investment, a favorable valuation, according to Jiang, especially given the upcoming recovery.

Jiang raised his overall estimate for F3Q23 to 244.9 billion yuan from 244.6 billion yuan. The analyst raised our Q3 2023 Adjusted EBITDA to 52.5 billion yuan from 51.5 billion yuan, reflecting better-than-expected cost control, especially on Taobao Deal and Taocaicai.

Citygroup Analyst Alicia Yap supported Alibaba with the purchase and raised its price target from $144 to $160.

Price Action: BABA shares traded up 3.45% to $114.72 when last checked on Tuesday.

Latest ratings for BABA

date of

Firm

Action

From

To

February 2022

Barclays

Supports

Overweight

February 2022

stiefel

Supports

Buy

February 2022

Citygroup

Supports

Buy

View other analyst ratings for BABA

View latest analyst ratings

Don’t miss real-time notifications about your promotions – join Benzinga Pro for free! Try a tool that will help you invest smarter, faster and better.

© 2023 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.

Content Source

News Press Ohio – Latest News:
Columbus Local News || Cleveland Local News || Ohio State News || National News || Money and Economy News || Entertainment News || Tech News || Environment News

Related Articles

Back to top button