Baird, a financial services firm, has increased its price target on Alibaba (NYSE:BABA) Group Holding Limited (NYSE: BABA) shares to $110 from the previous $88.
The firm maintained its Outperform rating on the stock. The adjustment reflects a more optimistic view of the company's earnings potential despite some industry challenges.
The analyst from Baird acknowledged Alibaba's position as a robust technology platform with significant scale advantages. However, concerns were expressed regarding the rate at which consumer and online spending in China could improve, given the intense competition in the market. The firm has adjusted its near-term expectations to slightly below the consensus, with a reduction in top-line estimates for the next year.
Despite near-term revenue estimate adjustments, Baird raised its forecast for Alibaba's fiscal year 2025 earnings per share (EPS). This upward revision is attributed to the company's operational discipline and recent actions to repurchase shares.
Field checks and data from China's National Bureau of Statistics (NBS) indicated a potential slowdown in e-commerce growth as of September. Nonetheless, preliminary reports from the Singles' Day sales event on November 11 suggest a more positive outcome.
In other recent news, Alibaba has reported a 6% increase in total revenues, reaching RMB 237.8 billion, according to recent reports. 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 the fiscal year 2025.
Analyst firms such as Barclays, BofA Securities, and Morgan Stanley have adjusted their price targets for Alibaba. Barclays has increased its price target to $137, while BofA Securities improved the price target to $124, and Morgan Stanley lifted its price target to $115. These adjustments reflect the firms' analysis of Alibaba's financial performance and growth prospects.
In addition to these financial developments, Alibaba launched an AI-powered sourcing agent and new financial and logistics solutions aimed at small and medium-sized enterprises. The company's cloud segment is experiencing continued revenue growth acceleration and is on the path to achieving double-digit growth.
InvestingPro Insights
Baird's optimistic outlook on Alibaba is supported by several key metrics from InvestingPro. The company's revenue growth of 5.9% over the last twelve months as of Q1 2023 aligns with Baird's view of Alibaba as a robust technology platform with scale advantages. Additionally, Alibaba's adjusted P/E ratio of 16.31 suggests that the stock may indeed be undervalued, as Baird's analysis indicates.
InvestingPro Tips highlight Alibaba's strong profitability, with a gross profit margin of 37.9% in the last twelve months as of Q1 2023. This underscores the company's operational discipline, which Baird cites as a factor in raising its EPS forecast.
Investors should note that InvestingPro calculates a fair value of $150.79 for Alibaba stock, significantly higher than Baird's new price target of $110. This suggests potential upside for investors, aligning with Baird's Outperform rating.
For a more comprehensive analysis, InvestingPro offers 23 additional tips for Alibaba, providing investors with a deeper understanding of the company's financial health and market position.
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