Barclays has maintained its Overweight rating on Alibaba (NYSE: NYSE:BABA) shares and increased the price target to $137.00 from the previous $107.00.
The firm anticipates Alibaba's September quarter results to align with expectations, forecasting mid-single-digit growth in Gross Merchandise Volume (GMV) and a low single-digit year-over-year increase in Customer Management Revenue (CMR).
The analyst noted that the gap between GMV and CMR continues to narrow as Alibaba intensifies its efforts to monetize its platform. It follows the implementation of a 0.6% technology platform fee initiated on September 1 and the gradual rollout of a new advertising platform aimed at enhancing monetization to match that of competitors.
Management has indicated that within approximately 12 months, CMR growth is expected to align closely with GMV growth after the new ad platform is fully operational.
Beyond its core China e-commerce business, referred to as Taobao and Tmall Group (TTG), Alibaba's international e-commerce and cloud computing segments are reportedly performing as anticipated in terms of revenue growth and profit margins.
In particular, the cloud segment is experiencing continued revenue growth acceleration and is on the path to achieving double-digit growth. The firm also expects the cloud segment's EBITA margins to remain sustainable at around 10%.
In other recent news, Alibaba Group Holding Ltd has reported a year-over-year increase of 6% in total revenues, reaching RMB 237.8 billion, according to BofA Securities. However, the company's total revenue of RMB 243 billion slightly missed the market consensus of RMB 250 billion, but exceeded gross profit expectations with RMB 97.1 billion. Alibaba has also been repurchasing shares, with a recent buyback of 52 million American Depository Shares for $4.1 billion in the second quarter of fiscal year 2025.
Analysts from various firms including Jefferies, JPMorgan, and BofA have adjusted their price targets for Alibaba, with BofA maintaining a Buy rating on the stock and improving the price target to $124. Jefferies and JPMorgan have also maintained Buy and Overweight ratings respectively, highlighting the potential for growth in Alibaba's domestic e-commerce business.
In terms of product development, Alibaba launched an AI-powered sourcing agent and new financial and logistics solutions aimed at small and medium-sized enterprises. The firm's adjusted EBITA for the September quarter is forecasted at RMB 40.1 billion, a 5% decline year-over-year, due to ongoing investments.
InvestingPro Insights
Alibaba's recent performance aligns with Barclays' optimistic outlook. According to InvestingPro data, Alibaba's revenue growth stands at 5.9% over the last twelve months as of Q1 2023, with a quarterly growth of 3.88% in Q1 2023. This supports Barclays' projection of mid-single-digit growth in Gross Merchandise Volume.
The company's operating income margin of 14.03% over the last twelve months suggests efficient management of operating expenses, which could be attributed to the monetization efforts mentioned in the article. Additionally, Alibaba's P/E ratio of 21.74 indicates that investors are willing to pay a premium for the company's earnings, possibly due to the anticipated growth in various segments.
InvestingPro Tips highlight Alibaba's strong return on invested capital and its history of consistently growing revenue. These factors align with the article's discussion on the company's efforts to enhance monetization and the expected performance of its international e-commerce and cloud computing segments.
For investors seeking a more comprehensive analysis, InvestingPro offers 17 additional tips for Alibaba, providing a deeper understanding of the company's financial health and growth prospects.
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