Jefferies Sees Upside Potential in Alibaba Stock

Analysts from Jefferies have reaffirmed a Buy rating on Alibaba shares in a recent note, highlighting a clear growth strategy and significant potential across various business segments.

The firm pointed out that Alibaba’s strategies, particularly within the Taobao Tmall Group (TTG) and the Alibaba International Digital Commerce Group (AIDC), are primed for enhancement.

For the September 2024 quarter, Jefferies anticipates a revenue increase of 6% year-over-year, forecasting RMB 239 billion for Alibaba.

Revenue for the Taobao Tmall Group is expected to rise by 1% year-over-year to RMB 98.7 billion, with a 3% increase in customer management revenue (CMR). Analysts believe that the difference between gross merchandise value (GMV) and CMR growth will narrow, aided by synergies with Weixin Payment, particularly among younger users in lower-tier cities.

The report also indicates that Alibaba’s Cloud Intelligent Group is set for a 7% year-over-year growth, driven largely by robust demand for artificial intelligence services. Meanwhile, AIDC is projected to continue improving efficiency and sustain revenue growth.

Despite these optimistic projections, Jefferies forecasts a 5% decline in EBITA to RMB 40.6 billion, mainly due to investments in Alibaba’s 88VIP program and losses in AIDC and other parts of the business.

Jefferies has emphasized several critical areas for Alibaba, including consumer sentiment, growth momentum, and the forthcoming Double-11 campaign, in conjunction with trends surrounding AI and cloud services.

The firm reiterated its Buy rating and price target, considering the latest business trends, and noted that the company has strong potential despite risks stemming from macroeconomic challenges and regulatory issues. Jefferies expects long-term growth to be fueled by Alibaba’s focus on enhancing operational efficiencies and exploring new market segments.