On Thursday, JPMorgan maintained its Overweight rating and HK$106.00 price target for Alibaba (NYSE:BABA) Group Holding Limited (9988:HK) (NYSE: BABA). The firm's stance comes after Alibaba's shares saw a 4% increase in Hong Kong on Wednesday, coinciding with its inclusion in the Stock Connect program. The e-commerce giant captured 90% of the total Southbound net inflow, amounting to HK$8.4 billion, on its first day of Stock Connect trading.
Alibaba's trading volume surged, with its value tripling to HK$16.9 billion, which represented approximately 15% of the total turnover of HK$107 billion on the Hong Kong stock market. JPMorgan anticipates that it might take several months for the full effects of the Stock Connect inclusion and Southbound inflows to be realized.
However, the firm suggests that Alibaba's core business growth in domestic e-commerce will primarily influence the stock's performance over the next six to twelve months.
The firm's analysis indicates that improvements in traffic, gross merchandise volume (GMV), and monetization for Alibaba's key platforms, Taobao and Tmall, are expected in the upcoming quarters. JPMorgan projects that these advancements could lead to a revaluation of Alibaba's stock, shifting its perception from a "market share donor" to a "stable e-commerce grower."
The report concludes with a reiteration of the Overweight rating for Alibaba's shares, underscoring the belief that the company's fundamental developments in e-commerce will be the central factor driving its share price in the medium term.
In other recent news, Alibaba.com 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. The platform also introduced the Alibaba.com Business Edge Credit Card, offering users cashback or interest-free payment terms.
In financial news, Alibaba's total revenue reached RMB 243 billion, slightly missing the RMB 250 billion market consensus, but the company's gross profit exceeded expectations, achieving RMB 97.1 billion.
Analysts from firms such as Jefferies, Susquehanna, Truist Securities, Baird, and Bernstein SocGen Group made adjustments to their price targets for Alibaba.
Jefferies maintained a Buy rating on Alibaba's stock, recognizing the company's successful completion of a three-year rectification process acknowledged by China's State Administration for Market Regulation.
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. These recent developments underscore Alibaba's commitment to innovation and societal value.
InvestingPro Insights
In light of JPMorgan's positive outlook on Alibaba Group Holding Limited (NYSE: BABA), recent data from InvestingPro further enriches the investment thesis for the e-commerce giant. Alibaba's adjusted market capitalization stands at a robust $198.27 billion, reflecting its significant presence in the market. The company's Price to Earnings (P/E) ratio, a key indicator of valuation, is currently at 21.59, with an even more attractive adjusted P/E ratio for the last twelve months as of Q1 2025 at 14.46. This suggests that Alibaba's earnings relative to its share price could be undervalued compared to historical averages.
Moreover, the company's revenue growth in the last twelve months as of Q1 2025 was 5.9%, with a gross profit margin of 37.9%, indicating healthy profitability. This aligns with JPMorgan's anticipation of improvements in Alibaba's core e-commerce business. Additionally, Alibaba's revenue growth for Q1 2025 stands at 3.88%, which, while modest, points to ongoing expansion in a challenging economic environment.
InvestingPro Tips highlight the importance of considering a company's Price to Book (P/B) ratio and growth metrics when assessing its stock. Alibaba's P/B ratio as of Q1 2025 is 1.5, which, combined with a positive revenue growth trajectory, may appeal to value-oriented investors. Furthermore, there are additional tips available on InvestingPro that can provide investors with a more comprehensive analysis of Alibaba's financial health and stock potential.
For investors seeking a deeper dive into Alibaba's financials and future outlook, InvestingPro offers a total of 10 additional tips that could be instrumental in making informed investment decisions. The platform's fair value assessment of $120.2 for Alibaba's stock also suggests potential upside from the previous close price of $84.81.
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