Alibaba: Strong Buy Reiterated - $160 Price Target

Seeking Alpha2022-05-31

SummaryAlibaba's FQ4 earnings card surprised to the upside. But, the Street was too pessimistic, so it was a relatively easy beat. However, management didn't guide for FY23.Yet, it didn't bother the ...

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Comments

mel18
2022-06-01
mel18
To reach that PT, depends a lot of result of next few quarters.hard to tell, esp with the politics
DZL
2022-05-31
DZL
Baba, strong buy for strong upside
GANCL
2022-05-31
GANCL
For long term investment
GANCL
2022-05-31
GANCL
For long term investment
Snowwhite
2022-05-31
Snowwhite
Yes, up up up! [Love you]
BhaskarB
2022-05-31
BhaskarB
That's not until...

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But, the Street was too pessimistic, so it was a relatively easy beat. However, management didn't guide for FY23.Yet, it didn't bother the ...</p>\n\n<a href=\"https://seekingalpha.com/article/4515146-alibaba-strong-buy-reiterated\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"09988","symbol_name":"阿里巴巴-W","start_time":0,"source_url":"https://seekingalpha.com/article/4515146-alibaba-strong-buy-reiterated","article_id":"1121166851","we_media_id":null,"thumbnails":[],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=1121166851","pubTimestamp":1653979018,"sourceInfo":null,"weMediaInfo":null,"summary":"SummaryAlibaba's FQ4 earnings card surprised to the upside. But, the Street was too pessimistic, so ","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"09988":"阿里巴巴-W","BABA":"阿里巴巴"},"translate_title":"阿里巴巴-SW：强劲买入重申-160美元价格目标","themeId":"","isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"09988":0.9,"BABA":0.9},"content_text":"SummaryAlibaba's FQ4 earnings card surprised to the upside. But, the Street was too pessimistic, so it was a relatively easy beat. However, management didn't guide for FY23.Yet, it didn't bother the market as BABA stock surged post-earnings. We also indicated in our previous article that the stock had likely bottomed in March.We reiterate our Strong Buy rating, with a medium-term price target of $160. Our PT implies an upside of 71%.Investment ThesisAlibaba Group Holding Limited (NYSE:BABA) recently delivered a better-than-estimated FQ4'22 earnings release. We had anticipated a relatively easy beat in ourpre-earnings article (Strong Buy), as the Street turnedeven more pessimistic. Notwithstanding, management declined to provide its customary guidance for FY23, given the evolving situation surrounding China's COVID lockdowns.However, BABA stock surged post-earnings, as our price action analysis suggested that the stock had already bottomed in March. Management is also sanguine about ongoing support from the Chinese government, lending credence to its potential recovery through FY23-24.As such, we reiterate our Strong Buy rating on BABA stock. We also discuss the tactical price targets (PTs) to watch in the near and medium-term. Our medium-term PT of $160 suggests an implied upside of 71% from Friday's close (May 27).The Lack Of FY23 Guidance Did Not Worry The MarketAlibaba revenue change % and adjusted EBIT margins % consensus estimates(S&P Cap IQ)Alibaba reported revenue growth of 8.9% in FQ4, down from 9.7% in FQ3. Notably, investors should expect Alibaba to report a topline growth of just 0.7% in FQ1'23 (ending June quarter), given the significant impact of the lockdowns in China. However, management emphasized that they have started to see marked improvements in May. It articulated (edited):The situation in May, with the resumption of express deliveries and with the beginning of the normalization of the situation in Shanghai, certainly, we see things improving. But it will take time for all of the outstanding parcels to be delivered and also for merchants to make their preparations for the upcoming 618 festival. But we certainly are seeing signs of improvement going into the month of May. (Alibaba's FQ4'22 earnings call)However, management didn't provide data points for the Street analysts to model for FY23. But we think the base case is still bullish for its 0.7% revenue growth estimates (30 Buys out of 40 ratings). Still, we believe Alibaba could surprise to the upside again in FQ1. Note that the company has already commenced the pre-sales for its 618 shopping event before the first wave of buying starts on May 31. We think the 618 event would be a critical juncture to evaluate the recovery cadence of consumer discretionary spending, assuming the lockdowns in China don't get worse.Furthermore, management remains optimistic about a favorable regulatory climate that could undergird Alibaba's recovery through FY23-24. CEO Daniel Zhang articulated (edited):We've seen that the government has been coming out with various policies lately, aimed at stabilizing the economy, stabilizing employment, and ensuring the provision of essentials to people. The State Council also convened an important meeting to implement measures in six different areas, several of which are highly relevant to the business of Alibaba, including stimulating consumption, ensuring the provision of essentials, and achieving supply chain recovery. So that's all highly relevant to us. (Alibaba's earnings)Focus on Costs Optimization Could Lift EPS MarkedlyAlibaba adjusted EPS and adjusted net margins % consensus estimates(S&P Cap IQ)With a much slower growth climate, investors should not expect the gangbusters growth of previous years. Alibaba's 10Y revenue CAGR of 45.5% and 10Y average EBIT margins of 26.4% are a thing of the past. Moving forward, investors must accept much slower growth and lower profitability. That should explain why BABA's stock has been battered significantly over the past 18 months. The market got it absolutely spot on. It priced in these headwinds astutely well ahead of time.As a result, management will focus on optimizing costs and improving operational efficiencies. We believe it's critical to help lift Alibaba's EPS estimates and net margins from its nadir through FY23-24.Notably, the consensus estimates suggest that the Street is confident that Alibaba's beaten down profitability could recover remarkably through FY23, despite slowing topline growth, as seen above. Its adjusted net margins are also expected to bottom out in FQ4'22 before improving significantly through FY23-24.Price Action Remains Highly Constructive Of A BottomBABA price chart(TradingView)Investors are encouraged to refer to our previous article for a more detailed discussion of BABA stock's strategic price action analysis. This article will focus on a more tactical framework to help investors visualize the PTs moving forward.Despite the recent headwinds, BABA stock has continued to hold its March capitulation signal. Furthermore, the US SEC's most recent warning about a lack of significant consensus around delisting didn't bother the market. Also, a lack of FY23 guidance has not worried investors.Consequently, we are confident that its March bottom should hold. We also observed the March bottom in the price action of the KraneShares CSI China Internet ETF (KWEB) that we discussed in a recent article.Our near-term PT of $120 sees the stock testing and breaking above its \"near term resistance 1\" before experiencing more significant selling pressure at the $130 resistance level. More conservative results can consider loosening some exposure at the near-term PT.Our medium-term PT of $160 (implied upside of 71%) sees the stock re-testing its \"intermediate resistance\" level of $180. We expect the stock to face much more significant selling pressure at that level. Therefore, we encourage investors to cut more exposure to protect gains. Moving forward, we will have a clearer idea of the price action picture.Consequently, we reiterate our Strong Buy rating on BABA stock, with a medium-term PT of $160.","kind":null,"is_publish_news":true,"is_publish_highlight":true,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[{"id":9027655120,"gmtCreate":1654038940760,"gmtModify":1676535381293,"author":{"id":"4097201280076440","authorId":"4097201280076440","name":"mel18","avatar":"https://community-static.tradeup.com/news/cb8392cdbd4f593469aed779f484434a","vip":1,"crmLevel":5,"crmLevelSwitch":0,"idStr":"4097201280076440","authorIdStr":"4097201280076440"},"htmlText":"To reach that PT, depends a lot of result of next few quarters.hard to tell, esp with the politics&nbsp;","listText":"To reach that PT, depends a lot of result of next few quarters.hard to tell, esp with the politics&nbsp;","text":"To reach that PT, depends a lot of result of next few quarters.hard to tell, esp with the politics","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":1,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/9027655120","repostId":1121166851,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":9027863768,"gmtCreate":1654008470854,"gmtModify":1676535377930,"author":{"id":"3582006183410147","authorId":"3582006183410147","name":"DZL","avatar":"https://static.tigerbbs.com/640ac3ae648fded99146300a53c24a5b","vip":1,"crmLevel":3,"crmLevelSwitch":0,"idStr":"3582006183410147","authorIdStr":"3582006183410147"},"htmlText":"Baba, strong buy for strong upside","listText":"Baba, strong buy for strong upside","text":"Baba, strong buy for strong upside","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":0,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/9027863768","repostId":1121166851,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":9027831547,"gmtCreate":1654005309289,"gmtModify":1676535377155,"author":{"id":"3566524239552357","authorId":"3566524239552357","name":"GANCL","avatar":"https://static.tigerbbs.com/02bdb0309baf16b47e74509dc75824e6","vip":1,"crmLevel":5,"crmLevelSwitch":0,"idStr":"3566524239552357","authorIdStr":"3566524239552357"},"htmlText":"For long term investment&nbsp;","listText":"For long term investment&nbsp;","text":"For long term investment","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":0,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/9027831547","repostId":1121166851,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":9027831690,"gmtCreate":1654005291110,"gmtModify":1676535377154,"author":{"id":"3566524239552357","authorId":"3566524239552357","name":"GANCL","avatar":"https://static.tigerbbs.com/02bdb0309baf16b47e74509dc75824e6","vip":1,"crmLevel":5,"crmLevelSwitch":0,"idStr":"3566524239552357","authorIdStr":"3566524239552357"},"htmlText":"For long term investment&nbsp;","listText":"For long term investment&nbsp;","text":"For long term investment","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":1,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/9027831690","repostId":1121166851,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":9027140034,"gmtCreate":1653999345728,"gmtModify":1676535375794,"author":{"id":"3562979576963766","authorId":"3562979576963766","name":"Snowwhite","avatar":"https://static.tigerbbs.com/f7b8537e21be09b6dce060ffe87a88e8","vip":1,"hat":"https://static.tigerbbs.com/0a8758340a08196056f8bc1e54805193","crmLevel":5,"crmLevelSwitch":1,"idStr":"3562979576963766","authorIdStr":"3562979576963766"},"htmlText":"Yes,&nbsp;up up up! [Love&nbsp;you]&nbsp;","listText":"Yes,&nbsp;up up up! [Love&nbsp;you]&nbsp;","text":"Yes, up up up! [Love you]","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":0,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/9027140034","repostId":1121166851,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":9027157885,"gmtCreate":1653999244247,"gmtModify":1676535375794,"author":{"id":"3576055655100541","authorId":"3576055655100541","name":"BhaskarB","avatar":"https://static.tigerbbs.com/ae63d5d863287dbf3e7d25ef9ab845e0","vip":1,"crmLevel":2,"crmLevelSwitch":0,"idStr":"3576055655100541","authorIdStr":"3576055655100541"},"htmlText":"That's not until...","listText":"That's not until...","text":"That's not until...","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":0,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/9027157885","repostId":1121166851,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"}],"isCommentEnd":false,"newsSizeData":{"likeSize":197,"commentSize":32,"repostSize":0,"favoriteSize":1,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.1","shortVersion":"4.29.1","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/1121166851"}