On Wednesday, BofA Securities adjusted its outlook on Alibaba (NYSE:BABA) Group Holding Ltd (NYSE:BABA), increasing the price target to $124 from $106 while maintaining a Buy rating on the stock. The revision comes ahead of the company's expected second-quarter fiscal year 2025 earnings report, slated for early to mid-November.
Alibaba is anticipated to exhibit a 6% year-over-year increase in total revenues, reaching RMB 237.8 billion. The core Taobao Tmall revenues are projected to remain relatively constant compared to the previous year. BofA estimates that the customer management revenues (CMR) for China marketplaces will see a modest 1.8% year-over-year growth, amounting to RMB 69.9 billion. This forecast is based on mid-single-digit percentage growth in gross merchandise value (GMV) and a slight decrease in the blended take rate, attributed to the rapid expansion of GMV in less monetized new models such as Tao Factory.
The report also projects that adjusted EBITA for Taobao Tmall will reach RMB 44.9 billion, marking a 5% decrease year-over-year, due to ongoing investments in service upgrades and seasonal trends. Meanwhile, Alibaba's international digital commerce and Cainiao logistics segments are expected to report robust year-over-year revenue growth of 29% and 15%, respectively, bolstered by strong cross-border commerce expansion.
Cloud computing revenues are predicted to grow by 8% year-over-year in the September quarter and are projected to accelerate to double-digit percentages in subsequent quarters. This growth is driven by increased demand for public cloud services and artificial intelligence. Despite the investments in Taobao Tmall impacting group margins, BofA forecasts a consolidated adjusted EBITA of RMB 40.1 billion for the September quarter, a 5% decline year-over-year.
Looking into the second half of fiscal year 2025, BofA anticipates a faster CMR growth rate of 4% year-over-year, propelled by initiatives such as QuanZhanTui and incremental Taobao service fees. This is expected to result in a return to growth for the group's consolidated adjusted EBITA by the March quarter of next year.
In other recent news, Alibaba has experienced notable developments. The company recently reported total revenue of RMB 243 billion, slightly missing the market consensus of RMB 250 billion, but exceeded gross profit expectations with RMB 97.1 billion. Morgan Stanley lifted Alibaba's stock price target to $115 from $90, while Jefferies maintained a Buy rating, increasing the price target to $142 from $116. JPMorgan also retained an Overweight rating on the company.
Alibaba has been actively repurchasing shares, with a recent buyback of 52 million American Depository Shares (ADS) for $4.1 billion in the second quarter of fiscal year 2025. The company also launched an AI-powered sourcing agent and new financial and logistics solutions aimed at small and medium-sized enterprises.
Analysts from multiple firms, including Jefferies, JPMorgan, Susquehanna, Truist Securities, Baird, and Bernstein SocGen Group, have adjusted their price targets for Alibaba, anticipating improvements in the company's key platforms, Taobao and Tmall.
InvestingPro Insights
To complement BofA's analysis, recent data from InvestingPro provides additional context for Alibaba's financial position. The company's market capitalization stands at $273.53 billion, reflecting its significant presence in the e-commerce and cloud computing sectors. Alibaba's revenue for the last twelve months as of Q1 2023 reached $130.75 billion, with a modest growth rate of 5.9%, aligning with BofA's projection of continued revenue expansion.
An InvestingPro Tip highlights that Alibaba's earnings per share are expected to grow this year, which could support the positive outlook on the stock. This aligns with BofA's anticipation of accelerated growth in the latter half of the fiscal year. Additionally, another InvestingPro Tip notes that analysts have recently revised their earnings estimates upwards, potentially reflecting growing confidence in Alibaba's performance.
For investors seeking a more comprehensive analysis, InvestingPro offers 19 additional tips for Alibaba, providing a deeper understanding of the company's financial health and market position.
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