The article "After the Performance" summarizes the latest target prices and views of brokerages after Alibaba announced its quarterly results
Alibaba (09988.HK)(BABA.US) announced its fourth fiscal quarter results for the fiscal year ending March 2025 after the market closed yesterday (15th). This morning, the stock opened down 6.1%, and during the day, it fell to a low of 120.3 HKD, a drop of 6.7%. It is currently reported at 122.2 HKD, down 5.2%, with a trading volume of 11.53 billion HKD. JP Morgan indicated that the negative reaction in Alibaba's stock price is due to several reasons, including a quarterly decline in cloud business profit margins, an expanded loss in the local life sector, which includes food delivery and flash purchase businesses, and a quarterly decrease in capital expenditures, mainly related to AI infrastructure. The bank believes this reflects increased investments in flash purchases and AI, with uncertainties in AI chip supply. Daiwa noted that Alibaba's cloud business growth continues to accelerate, but ongoing investments in flash purchase businesses may attract short-term market attention.
In the first quarter, Alibaba's net profit increased 2.79 times year-on-year to 12.382 billion RMB, influenced by changes in the market value of equity investments, increased operating profit, and reduced impairment of equity method investments, partially offset by losses from the disposal of subsidiaries. The diluted earnings per share were 0.65 RMB, and the diluted earnings per American Depositary Share were 5.17 RMB. The quarterly non-GAAP net profit rose 22.2% year-on-year to 29.847 billion RMB, lower than the median forecast of 32 billion RMB from four brokerages. The non-GAAP diluted earnings per share were 1.57 RMB, and the diluted earnings per American Depositary Share were 12.52 RMB. For the entire fiscal year, a dividend of 0.25 and 2 USD per ordinary share and American Depositary Share will be distributed, including a regular dividend of 0.13125 and 1.05 USD, as well as a one-time dividend of 0.11875 and 0.95 USD, with a total dividend amount of approximately 4.6 billion USD.
The adjusted EBITA for the quarter increased 36% year-on-year to 32.616 billion RMB, exceeding the median forecast of 32 billion RMB from twelve brokerages. The adjusted EBITA margin increased by 3 percentage points year-on-year to 14%. Quarterly revenue rose 6.6% year-on-year to 236.454 billion RMB, lower than the median forecast of 237.45 billion RMB from sixteen brokerages. Among them, Taotian Group's revenue grew 9% to 101.369 billion RMB, with customer management revenue increasing 12% to 71.077 billion RMB, driven by increased revenue from basic software service fees and improved penetration of "full-site promotion," pushing up the Takerate. The Cloud Intelligence Group's revenue increased 18% year-on-year to 30.127 billion RMB, with AI-related product revenue achieving triple-digit year-on-year growth for seven consecutive quarters. Alibaba's International Digital Commerce Group's revenue rose 22% year-on-year to 33.579 billion RMB, while the Local Life Group and the Big Entertainment Group's revenues grew by 10% and 12%, respectively, to 16.134 billion and 5.554 billion RMB. Cainiao's revenue fell 12% year-on-year to 21.573 billion RMB [Citi: Alibaba Cloud Revenue and Profit Margin Below Market Expectations]
JP Morgan believes that Alibaba's investments in flash sales and delivery services will proceed at a controllable pace, with the impact on profits within a reasonable and controllable range (expected to affect Alibaba's net profit for the fiscal year 2026 by about 5%). It recommends buying on dips when the stock price is weak. The bank gives Alibaba an "Overweight" rating and a target price of 165 HKD.
HSBC Global Research published a report stating that it has raised its revenue forecasts for Alibaba for the current fiscal year and the next three fiscal years by 1% to 2%, despite the intensified competition in local services. Profit forecasts remain largely unchanged, as higher contributions from Taotian may be offset by increased investments in flash sales and local services. The bank still assumes that Taotian's profit margin will decline year-on-year in the coming quarters. However, it is confident that Alibaba Cloud's revenue can continue to accelerate, achieving an expected 20% year-on-year growth for the current fiscal year. Strong AI demand boosts public cloud demand. AI capital expenditure commitments remain unchanged, and a multi-chip strategy can mitigate potential disruptions in chip supply. The bank notes that given the stock price's excellent performance over the past month due to easing trade tensions, as well as the market's cautious attitude towards intensified competition and increased investment commitments, the stock price may temporarily pause in the short term. The bank maintains a "Buy" rating on the stock with a target price of 172 HKD. It is optimistic about Alibaba's customer management services and cloud business's robust revenue prospects. Planned shareholder returns can also support valuations.
Citi pointed out that although Alibaba's first-quarter customer management revenue (CMR) and Taotian Group EBITA increased by 12% and 8% year-on-year, respectively, the cloud business revenue grew by 18% year-on-year, and the cloud business profit margin was below market expectations. The bank believes that Alibaba's international digital commerce and logistics revenue fell short of expectations, and deviations in EBITDA/EBITA/net profit may exacerbate negative views on performance. Alibaba remains committed to reinvesting in AI and product price competitiveness to maintain market share while increasing investments in flash sales, which may lead to short-term fluctuations in Taotian Group EBITA. However, benefiting from a surge in demand from enterprise customers across various industries, Alibaba is expected to see accelerated revenue growth in its cloud business for the current fiscal year. With increasing software costs and higher penetration of advertising tools across the site, the robust growth trend in customer management services is expected to continue in the current fiscal year. The bank has lowered its revenue forecasts for Alibaba for the current and next fiscal years by 1.5% and 0.8%, respectively, and reduced the same period's non-GAAP profit by 13% and 9.4%, reflecting actual quarterly performance and management's comments on accelerated growth in cloud business and investments in flash sales. The target price remains at 165 HKD, with a "Buy" rating.
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The latest comprehensive investment ratings and target prices from 10 brokerages:
The table below lists the ratings and target prices for Alibaba (09988.HK) from 7 brokerages:
Brokerage│Investment Rating│Target Price
Macquarie│Outperform│176.3 HKD->182.3 HKD
UBS│Buy│176 HKD HSBC Global Research | Buy | HKD 172
JP Morgan | Overweight | HKD 165
Citi | Buy | HKD 165
Goldman Sachs | Buy | HKD 154
Friedrich | Buy | HKD 155 -> HKD 151
The table below lists the ratings and target prices from 10 brokerages for Alibaba (BABA.US):
Brokerage | Investment Rating | Target Price
Macquarie | Outperform | USD 181.3 -> USD 187.5
Morgan Stanley | Overweight | USD 180
UBS | Buy | USD 180
HSBC Global Research | Buy | USD 176
Daiwa | Buy | USD 180 -> USD 175
Nomura | Buy | USD 172
JP Morgan | Overweight | USD 170
Citi | Buy | USD 169
Goldman Sachs | Buy | USD 159
Friedrich | Buy | USD 160 -> USD 156
Brokerage | Viewpoint
Macquarie | Core customer management revenue exceeds expectations
UBS | Quarterly revenue and adjusted EBITA slightly below expectations
Morgan Stanley | Quarterly customer management revenue exceeds expectations, but cloud business meets expectations
JP Morgan | Earnings outlook may be affected by flash purchase investments, recommends collecting on stock price weakness
Citi | Improvement in customer management services revenue and acceleration in cloud revenue will be maintained in the current fiscal year
Goldman Sachs | Taotian business exceeds expectations, cloud business meets expectations
Friedrich | For long-term investment
HSBC Global Research | Improvement in customer management revenue outlook
Daiwa | Cloud business growth continues to accelerate
Nomura | E-commerce exceeds expectations, cloud business meets expectations
