Just like the last two years, Alibaba (NYSE: BABA) 2023 has been mostly a disappointment on the stock market front. For the record, shares are currently down 36% from this time last year.
However, looking at the Chinese tech giant’s prospects, Jefferies analyst Thomas Chung is confident that BABA still has a lot to offer investors.
“We expect BABA to drive AI innovations and unlock synergies across TTG (Taobao Tmall Group) and the cloud,” the analyst said. “We view BABA’s strategies as sound following the announcement of 3-year targets, and it continues to return value to shareholders.”
This value may be less clear given the lack of recent returns, but the company has been busy restructuring the business, and going forward, Chung expects the changes to yield results.
One big change includes the appointment of Eddie Wu, CEO of Alibaba Group, as CEO of TTG, the company’s largest revenue generator, replacing Trudy Day, who will co-found an asset management company. “We expect the company to focus on managing non-core assets in order to increase the return of capital to shareholders,” said Chung. “We believe these moves can unlock further synergies after setting three-year targets for different business units.”
Looking at Alibaba’s December quarter earnings, Chong expects a year-on-year revenue growth rate of 5%, lower than the previous forecast of 7%, and is expected to reach CNY260 billion. Broken down by sectors, Zhong expects TTG’s revenue to increase just 1% year-on-year (compared to the previous forecast of 5.5%), to reach CNY128 billion. On the other hand, customer management revenues are expected to remain flat, contrary to previous expectations, with an increase of 3%, and reach CNY 91 billion. Furthermore, Chung believes that GMV (gross merchandise volume) will see 3% year-on-year growth, an improvement over the previous estimate of 1%.
“The slower growth in CMR versus GMV is mainly due to the change in product mix, while purchase rates for both Taobao and Tmall are likely to increase year-on-year,” Zhong explained.
Better than previously expected growth should be on Alibaba International Digital Commerce Group’s (AIDC) list. Revenue is now expected to rise 41% year-on-year versus 29% previously, with Chung commenting that there is “better-than-expected revenue momentum and model adoption for the cross-border AIDC sector.”
Overall, Chong rates BABA a Buy Share, though he lowered his price target from $145 to $133. However, the revised figure still represents a significant upside of approximately 84% from current levels. (To view Chung’s track record, click here)
Most analysts think along the same lines. BABA stock has a Strong Buy consensus rating based on a mix of 18 Buys and 2 Holds. Moving to the average target of $122.30, a year from now, investors will see returns of approximately 69%. (be seen Alibaba stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.