Morgan Stanley: Admitting to underestimating Alibaba (09988) raises target price to HK $174.9 and expects cloud business revenue to double in the next three years

Zhitong Finance APP learned that,Alibaba(09988) The stock price has risen by 65% year-to-date,Morgan StanleyAccording to the latest research report, it admitted that it underestimated the demand for artificial intelligence (AI) to boost Alibaba Cloud Computing and the resilience of its main business Taobao and Tmall business, and "admitted its mistake". Morgan Stanley believes that the revenue of Alibaba's cloud intelligence business will double in the next three years, and has significantly raised the target price of Alibaba's ADR (BABA.US) by US $80 to US $180, and its rating has been raised from "keeping pace with the market" to "overweight". Morgan Stanley even pointed out that in the optimistic scenario, Alibaba Cloud alone is already worth US $100 per share, and Alibaba Group is valued at US $300 per share. Based on Alibaba's Hong Kong stock price, Morgan Stanley's latest basic target price is approximately equivalent to HK $174.9, and the upper limit valuation is HK $291.5 per share.

Morgan Stanley believes that there are two major mistakes in the previous analysis of Ali. First of all, since the emergence of DeepSeek in January this year, the bank did not expect the growth of Alibaba Cloud's business to accelerate significantly. Morgan Stanley's latest forecast is that cloud business revenue will increase by 18% in the fourth quarter of fiscal year 2025 (that is, January to March), and the growth in fiscal year 2026 will reach 25%.

Morgan Stanley predicts that with Alibaba's announcement of more than 300 billion yuan in capital investment in cloud and AI facilities in the next three years, Alibaba Cloud's revenue will climb from 118 billion yuan in fiscal year 2025 to 240 billion yuan in fiscal year 2028, that is, Double growth within three years.

Benefiting from economies of scale, Morgan Stanley believes that Alibaba Cloud's EBITDA (profit before interest, tax, depreciation and amortization) profit margin will rise from 20% this fiscal year to 35% three years later. However, due to the sharp increase in depreciation expenses, the EBITA margin in fiscal 2026-28 will beOriginalThe first forecast of 10% to 12% dropped to 5% to 8%.

Morgan Stanley admitted that another mistake was underestimating the resilience of Taotian's business. Even though mainland consumption is still weak and industry competition is fierce, Taotian's business is not as fragile as market fears. Supported by higher commission rates, it is expected that even if the group continues to invest in Taotian's business, the merchandise transaction volume (GMV) will increase in the next few quarters. 3% to 5%, EBITA earnings can remain stable.

Regarding the calculation method of Alibaba's upper limit valuation of US $300, Morgan Stanley said that the latest base scenario target price of US $180 is calculated using the discounted cash flow (DCF) method, which is equivalent to 16.6 times the forecast P/E in fiscal year 2027, while the original target price Corresponding to 13.6 times the P/E in fiscal year 2026.

If calculated by the sum of business segments (SoTP), Morgan Stanley estimates that Alibaba's main business, Taotian Group, is worth US $90 per share (reflecting 10 times P/E), and its cloud business is worth US $60 (reflecting 5 times the enterprise value of sales), and the rest of the business is worth another US $50, for a total value of US $200.

In the upper limit valuation scenario, Morgan Stanley estimates that Taotian Group is worth US $120 per share (reflecting 12 times P/E), the cloud business is worth US $100 (reflecting 7 times the enterprise value of sales), and the remaining businesses are worth another US $80. The total value is $300.

In addition to being optimistic about Alibaba, Morgan Stanley also upgraded the investment rating of China's Internet stocks from "similar to the market" to "attractive" and willTencent(00700) is regarded as the first choice in the industry, in addition to Meituan (03690),Pinduoduo(PDD.US) andJD.com(09618)。