Jefferies has reaffirmed its Buy rating on shares of Alibaba (NYSE:BABA) Group Holding Limited (NYSE: BABA), maintaining a price target of $116.00 in light of recent adjustments to merchant services on Alibaba's platforms, Taobao and Tmall, which include changes to user experience scores, free refund policies, and a shift to a service fee model.
The new service fee structure will be calculated at 0.6% of Gross Merchandise Volume (GMV) on completed transactions. It is expected to impact the revenue from service fees, particularly benefiting from the high volume of sales on Taobao, which is estimated to account for approximately half of Alibaba's total GMV.
As per Jefferies analysis, the revised fee structure is anticipated to be more favorable for merchants on Tmall with significant GMV, as these merchants will now be subjected to a variable fee rather than the previous fixed fees, which ranged from 30,000 to 60,000 RMB.
Meanwhile, analyst firm Jefferies recently continued its Buy rating on Alibaba shares, raising the price target to $116 from $114, citing Alibaba's commitment to its three-year growth plan. At the same time, BofA Securities, Loop Capital, and Mizuho have also maintained a Buy rating, adjusting their stock price targets in response to the company's recent performance.
Alibaba has reported robust growth in its core businesses and artificial intelligence revenue during the March quarter and full fiscal year 2024. The company also raised $5 billion through a private offering of convertible senior notes, demonstrating an active capital return strategy.
The company has also launched Alibaba Guaranteed, a service aimed at simplifying global sourcing and supply chain processes for Micro-, Small, and Medium-Sized Enterprises (MSMEs). Alibaba.com, the company's B2B platform, is also intensifying its efforts to empower MSMEs with artificial intelligence tools.
InvestingPro Insights
Alibaba Group Holding Limited (NYSE: BABA) continues to attract investor interest with its strategic adjustments and growth initiatives. In light of recent developments, InvestingPro data shows a market capitalization of $179.15 billion, reflecting the scale and significance of the company in the e-commerce sector. The adjusted P/E ratio as of the last twelve months of Q4 2024 stands at 11.93, indicating a potentially more attractive valuation when compared to the industry average. Additionally, the company's revenue growth of 8.34% during the same period suggests a consistent upward trajectory in its financial performance.
Investors seeking to understand the potential for future growth may consider the PEG ratio, which for Alibaba is 1.18 as of the last twelve months of Q4 2024, offering an insight into the expected rate of growth relative to earnings. With a robust gross profit margin of 37.7% and an operating income margin of 14.74%, the company's profitability metrics remain strong.
For those interested in more detailed analysis and additional insights, InvestingPro offers further tips on Alibaba's financial health and investment potential. Currently, there are more tips available, which can be accessed through an InvestingPro subscription. Utilize the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription, providing a comprehensive toolkit for informed investment decisions.
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