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Alibaba stock valuation adjusted upward by Jefferies amid favorable market conditions

EditorAhmed Abdulazez Abdulkadir
Published 10/02/2024, 07:57 AM
BABA
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On Wednesday, Jefferies maintained a Buy rating on shares of Alibaba (NYSE:BABA) and increased the price target to $142 from $116. The firm's analysis suggests that critical events in the internet sector over the past two decades have often led to re-evaluation and shifts in valuation approaches. The recent policy measures are viewed as significant for the sector's potential recovery.

The recommendation comes as the firm looks ahead, basing its valuation on projections for the year 2025. Jefferies emphasizes the importance of considering a set of 16 companies for investment, which have been selected based on their relative valuation, industry dynamics, earnings growth, and how they compare in value to their international counterparts.

Alibaba, a leading player in the e-commerce and technology space, is among the companies that Jefferies has identified as potentially undervalued when compared to its peers abroad. The firm's forward-looking approach to valuation reflects a positive outlook on the company's future financial performance.

The updated price target of $142 indicates a significant increase from the previous target, suggesting that Jefferies has a strong conviction in Alibaba's growth prospects. This adjustment in the price target is a direct result of the firm's analysis of the industry and Alibaba's positioning within it.

In other recent news, Alibaba Group Holding Limited has seen several significant developments. The company reported total revenue of RMB 243 billion, falling slightly short of the RMB 250 billion market consensus, but exceeding gross profit expectations with RMB 97.1 billion. Analysts from firms such as JPMorgan, Jefferies, Susquehanna, Truist Securities, Baird, and Bernstein SocGen Group have made adjustments to their price targets for Alibaba.

JPMorgan maintained an Overweight rating, anticipating improvements in traffic, gross merchandise volume, and monetization for Alibaba's key platforms, Taobao and Tmall. Jefferies maintained a Buy rating, recognizing Alibaba's successful completion of a three-year rectification process acknowledged by China's State Administration for Market Regulation.

Alibaba has also launched an AI-powered sourcing agent and new financial and logistics solutions, aimed at enhancing efficiency for small and medium-sized enterprises in the global market. They also introduced the Alibaba.com Business Edge Credit Card, offering users cashback or interest-free payment terms.

Analysts anticipate Alibaba's loss-making businesses to reach the breakeven point within the next one to two years and expect revenue from external customers in Alibaba Cloud to return to double-digit growth in the second half of the fiscal year.

InvestingPro Insights

Jefferies' bullish stance on Alibaba is supported by recent InvestingPro data, which reveals compelling metrics about the company's financial health and market performance. Alibaba's market capitalization stands at an impressive $262.8 billion, reflecting its significant presence in the global e-commerce and technology sectors.

The company's revenue growth of 5.9% over the last twelve months as of Q1 2023 aligns with Jefferies' positive outlook on Alibaba's future prospects. This growth, coupled with a robust gross profit margin of 37.9%, underscores Alibaba's ability to maintain profitability while expanding its operations.

InvestingPro Tips highlight additional strengths:

1. Alibaba's stock price has shown remarkable momentum, with a 53.01% total return over the past three months.

2. The company's P/E ratio of 21.74 suggests it may still be undervalued compared to some of its peers, supporting Jefferies' view on its potential for further appreciation.

These insights are just a sample of the valuable information available through InvestingPro. Subscribers can access over 10 additional tips for Alibaba, providing a more comprehensive analysis to inform investment decisions.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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