On Thursday, JPMorgan analyst Alex Yao increased the stock price target for Alibaba (NYSE:BABA) Group Holding Limited (NYSE:BABA) stock, lifting it to $125 from the previous $120, while maintaining an Overweight rating on the shares. Currently trading at $83.69, Alibaba maintains a strong "Buy" consensus among analysts, with targets ranging from $85 to $144.
According to InvestingPro analysis, the stock appears undervalued based on its comprehensive Fair Value model. Yao's optimism is based on anticipated positive outcomes for Alibaba in the December quarter, including an expected improvement in Gross Merchandise Volume (GMV) growth rate compared to the September quarter.
This improvement is partly attributed to enhanced consumer engagement with Alibaba's platforms Taobao and Tmall, which reported robust GMV growth during the Single’s Day promotion, as noted by Group CEO Eddie Wu on the last earnings call.
Another positive development Yao anticipates is an acceleration in Alibaba's core Customer Management Revenue (CMR) growth rate. The CMR is projected to increase from 2.5% in the September quarter to 6% in the December quarter, following the introduction of a 0.6% commission monetization for Taobao in September 2024.
The company's overall revenue growth stands at 5.14% over the last twelve months, with InvestingPro data showing strong financial health metrics, including a healthy EBITDA of $24.9 billion and a market capitalization of $189.5 billion.
Moreover, Yao expects Taobao & Tmall Group's (TTG) adjusted EBITDA to return to positive year-over-year growth, estimated at 6%, due to incremental monetization and rational investment.
However, the analyst also notes that the visibility of TTG consistently delivering positive adjusted EBITDA growth in the coming quarters is uncertain. This uncertainty is attributed to factors such as a change in TTG's CEO, which may lead to a different execution strategy, a highly competitive market environment, and the stage of Alibaba's investment cycle.
The fiscal year 2025 marks the first year of TTG's three-year investment cycle, indicating that Alibaba's current key focus might be more on expanding GMV and CMR, rather than immediate profit.
Despite these uncertainties, JPMorgan's Yao remains positive about Alibaba's long-term prospects. He believes that profit growth is a natural result of market share stabilization and monetization improvement, provided that cost control is effectively managed. The analyst sees multiple drivers for Alibaba's long-term upside, suggesting continued potential for the company's stock performance in the future.
Trading at a P/E ratio of 18.03, with a solid gross profit margin of 38.2%, Alibaba shows promising fundamentals. For deeper insights into Alibaba's valuation and growth potential, investors can access the comprehensive Pro Research Report, available exclusively on InvestingPro, which provides detailed analysis of over 1,400 top stocks.
In other recent news, Alibaba Group Holding Ltd has reported a 5% increase in consolidated revenue for Q3 2024, reaching RMB 236.5 billion. The company also disclosed an update on its share repurchase program in a recent filing with the Securities and Exchange Commission (SEC). This update is part of Alibaba's ongoing efforts to enhance shareholder value.
On the analyst front, Morgan Stanley (NYSE:MS) maintained its Equalweight rating on Alibaba, while Citi reaffirmed its Buy rating, citing the potential benefits of Alibaba's recent strategic moves.
In other news, Baozun Inc (NASDAQ:BZUN). has announced the renewal of a significant continuing connected transaction, indicating its commitment to strategic partnerships and growth in the e-commerce sector.
In addition, Alibaba has announced the formation of a new e-commerce business group, aiming to consolidate its operations and improve efficiency. This move aligns with Alibaba's broader business strategy and its commitment to maintaining a leading position in the e-commerce space.
These are recent developments for both Alibaba and Baozun, providing investors with insights into the companies' current corporate actions and strategies.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.