On Wednesday, BofA Securities updated its outlook on shares of Alibaba (NYSE:BABA) Group Holding Limited (NYSE:BABA), raising the stock's price target from $103.00 to $106.00 while maintaining a Buy rating. The firm anticipates Alibaba will unveil its first quarter fiscal year 2024 results on August 15, projecting a 6% year-over-year increase in total revenue to RMB 247.8 billion, aligning with consensus estimates. The core Taobao Tmall revenue is expected to grow by 1.9% year-over-year.
The analysis predicts that China marketplaces' Customer Management Revenue (CMR) will rise by 2.3% year-over-year to RMB 81.5 billion. This is attributed to mid-to-high single-digit percentage Gross Merchandise Volume (GMV) growth and a year-over-year reduction in the monetization rate, as the GMV mix shifts towards Taobao.
The report indicates that Taobao Tmall has managed to slightly outperform the industry, as the National Bureau of Statistics reported only a 6.4% increase in physical online goods sales in the second quarter of 2024.
Looking forward, BofA Securities expects CMR revenues to reaccelerate in the second half of the fiscal year 2024, catching up with GMV growth due to the full rollout of dynamic ads and an incremental commission rate to be charged to all Taobao merchants. Alibaba's international digital commerce and Cainiao logistics revenues are forecasted to grow by 41% and 25% year-over-year, respectively, driven by rapid expansion in cross-border commerce.
For cloud revenues, a modest 3% year-over-year increase is estimated for the June quarter, with expectations of acceleration to over 10% in the second half of the fiscal year as the impact of the private cloud sector subsides. Despite continued investments in both domestic and cross-border e-commerce expected to affect the bottom line, the group's adjusted net profit is anticipated to be in line with consensus at a 15% year-over-year decline to RMB 38.1 billion.
In other recent news, Alibaba Group Holding Limited has reported significant growth in its core businesses and artificial intelligence revenue during the March quarter and full fiscal year 2024. The company also successfully raised $5 billion through a private offering of convertible senior notes.
Alibaba's recent strategic maneuverings have been met with positive reactions from analyst firms. Jefferies, BofA Securities, Loop Capital, and Mizuho have all maintained a Buy rating on Alibaba's stock, with adjustments to their price targets based on the company's recent performance.
In addition, Alibaba has been actively supporting Micro-, Small, and Medium-Sized Enterprises (MSMEs) through the launch of Alibaba Guaranteed and the intensification of artificial intelligence tools on Alibaba.com. The company also disclosed an update on its share repurchase program, signaling an active capital return strategy. These recent developments offer investors a snapshot of Alibaba's current business landscape.
Loop Capital has expressed optimism for a positive shift in Alibaba's valuation, citing expectations for market share stabilization, improved monetization, and a reacceleration in cloud revenue growth as potential catalysts. These projections have led to an increase in the firm's price target for Alibaba from $111 to $115.
InvestingPro Insights
In light of BofA Securities' updated outlook on Alibaba Group Holding Limited (NYSE:BABA), InvestingPro data offers additional insights into the company's financial health and market performance. With a market capitalization of $192.69 billion, Alibaba's adjusted P/E ratio for the last twelve months as of Q4 2024 stands at 12.47, suggesting a potentially more attractive valuation compared to its current P/E of 18.19. Additionally, the company's revenue growth during the same period was 8.34%, reflecting a steady increase in sales.
InvestingPro Tips highlight Alibaba's robust gross profit margin of 37.7% for the last twelve months as of Q4 2024, indicating efficient cost management relative to its revenue generation. Moreover, the company's EBITDA growth of 19.02% during the same period underscores its operational strength. These metrics are particularly relevant as they provide a broader context to the firm's performance, complementing BofA Securities' revenue projections and expectations for the core Taobao Tmall business.
For investors seeking a deeper analysis, InvestingPro offers additional tips on Alibaba, which can further inform investment decisions. Currently, there are 15 more InvestingPro Tips available, which include detailed assessments of Alibaba's financials, market trends, and potential investment risks and opportunities.
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