On Monday, Benchmark reaffirmed its Buy rating on Alibaba (NYSE:BABA) Group Holding Limited (NYSE:BABA) with a steady price target of $118.00. The firm's analysis acknowledged the mixed results in Alibaba's recent earnings report.
Alibaba's Customer Management Revenue (CMR) saw an accelerated growth of 2.5% year-over-year in the second fiscal quarter, slightly surpassing expectations. This growth is attributed to the implementation of new software service fees and the increasing adoption of Alibaba's marketing platform, Quanzhantui.
Despite the positive aspects, Alibaba's Gross Merchandise Volume (GMV) growth remained modest, registering in the low single digits year-over-year. This has raised questions about Alibaba's long-term market share defense amidst competitive pressures. The volatility in GMV growth complicates projections for the company's future performance.
Nevertheless, Benchmark noted that the feedback from the Double 11 shopping event has been generally positive, and anticipated stimulus policies could offer additional support to the company.
Concerns have also been raised regarding investment pressures, as evidenced by the year-over-year decline in Throughput Total (EPA:TTEF) Growth (TTG) profitability. However, Benchmark suggests that Alibaba's strategic moves, including tapping into new user growth sources such as WeChat Pay, are steps in the right direction. These initiatives are expected to contribute to a recovery in consumption patterns.
Moreover, Alibaba has been working on reducing losses from non-core assets, a move that is expected to mitigate profitability challenges at the group level and provide a safeguard for earnings. Benchmark's analysis concludes that these efforts should offer downside protection for Alibaba's earnings, despite the current challenges and complexities in the market.
In other recent news, Alibaba Group Holding Limited reported a steady growth in its recent financial reports. The company's Q3 2024 earnings call revealed a 5% year-over-year increase in consolidated revenue, reaching RMB 236.5 billion, largely driven by its core e-commerce and cloud services segments.
However, the company's free cash flow saw a significant 70% decrease, primarily due to investments in cloud infrastructure. Despite this, Alibaba maintains an optimistic outlook on its AI-driven strategy and future growth prospects.
Susquehanna reaffirmed its bullish stance on Alibaba, citing the company's strong position in the Chinese e-commerce market and its significant growth potential. The firm also highlighted Alibaba's second-quarter revenue increase and earnings before interest, taxes, depreciation, and amortization (EBITDA) surpassing their estimates.
Furthermore, Morgan Stanley (NYSE:MS) adjusted Alibaba's financial outlook, reducing the price target due to anticipated market share loss and mixed performance in various business segments.
These are recent developments that highlight Alibaba's strategic AI and cloud infrastructure investments, positioning it for sustainable growth in the digital economy.
InvestingPro Insights
Adding to Benchmark's analysis, recent InvestingPro data provides further context on Alibaba's financial position. The company's market capitalization stands at $201.47 billion, reflecting its significant presence in the e-commerce sector. Alibaba's P/E ratio of 18.45 suggests a relatively moderate valuation compared to some tech peers, while its adjusted P/E ratio for the last twelve months as of Q2 2025 is even lower at 12.85, potentially indicating an attractive entry point for investors.
InvestingPro Tips highlight Alibaba's strong profitability, with a gross profit margin of 38.2% for the last twelve months as of Q2 2025. This aligns with Benchmark's observations on the company's efforts to manage profitability amid investment pressures. Additionally, Alibaba's revenue growth of 5.14% over the same period, while modest, supports Benchmark's note on the positive acceleration in Customer Management Revenue.
For investors seeking a deeper dive into Alibaba's prospects, InvestingPro offers 18 additional tips, providing a comprehensive view of the company's financial health and market position.
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