Alibaba Is Hugely Undervalued?

Seeking Alpha2023-11-23

Alibaba Group Holding Limited offers a compelling investment opportunity with a diversified portfolio spanning e-commerce, cloud services, logistics, and digital media, providing resilience in a ...

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Comment（5）

Kong123
·2023-11-23
Yes, agree
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Aivern
·2023-11-23
Hugely? No. Pooh can just decide one day alibaba sounds anti china and close it down. It's fairly priced.
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Arbunsah
·2023-11-23
Good
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sjsjsj
·2023-11-23
Sounds good....👍
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1
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HzxS
·2023-11-23
Nice 👍🏻🍻
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portfolio spanning e-commerce, cloud services, logistics, and digital media, providing resilience in a ...\n\n<a href=\"https://seekingalpha.com/article/4653737-alibaba-is-hugely-undervalued\">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":"LU0348816934.USD","symbol_name":"ALLIANZ TOTAL RETURN ASIAN EQUITY \"AT\" (USD)","start_time":0,"source_url":"https://seekingalpha.com/article/4653737-alibaba-is-hugely-undervalued","article_id":"2385466779","we_media_id":null,"thumbnails":[],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2385466779","pubTimestamp":1700722800,"sourceInfo":{"source_id":"seekingalpha","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"Alibaba Group Holding Limited offers a compelling investment opportunity with a diversified portfolio spanning e-commerce, cloud services, logistics, and digital media, providing resilience in a 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with an undervaluation that could be as high as 161.9%, presents an attractive entry point for investors looking to capitalize on Alibaba's long-term growth prospects.Investors must remain vigilant to potential risks, including governmental influence, economic downturns, and competition from foreign players, acknowledging the nuanced balance between Alibaba's strengths and external factors.Alibaba's solid financial foundation, diversified revenue streams, and strategic positioning position it favorably for long-term growth, making it a promising investment choice.Robert WayThesisAfter the release of FQ2 2024, Alibaba Group Holding Limited (NYSE:BABA) experienced a 10% decline as the company fell short of revenue expectations by $250 million, despite EPS estimates. Additionally, the company abandoned its plans to spin off its cloud business, citing uncertainties in the growth trajectory caused by the U.S.-imposed restrictions on AI chip imports.Nevertheless, in this article, I will elucidate using two valuation models why Alibaba is significantly undervalued, marking an undervaluation of up to 80%. This substantial undervaluation provides a considerable margin of security for investors, warranting a \"strong buy\" recommendation. I propose a fair price of $148.1 for the stock.OverviewFQ2 2024 AlibabaFY 2023Q2 2024 EarningsIn FQ2 2024, Alibaba outperformed expectations in earnings but fell short on revenue, with a notable miss of $230 million. Despite this, the company reported an impressive EPS of $2.14, surpassing the consensus by $0.05.The most significant blow to these earnings results came as Alibaba opted to abandon its plan to spin off its cloud business. The rationale behind this decision was a belief that the spin-off would not deliver the anticipated shareholder value. Furthermore, the company pointed to the current export restrictions on AI chips imposed by the U.S., which has cast uncertainty over the prospects of its cloud segment.Adding to the challenges, Alibaba disclosed that Jack Ma's family trust intends to sell 10 million shares valued at $870.71 million on November 21.MarketE-Commerce ChinaAlibaba's primary focus lies in e-commerce, as illustrated in the table below, with a significant dependency on China, representing 67% of this segment. However, since 2021, Alibaba has successfully reduced its reliance on the Chinese market by 3%.In addition to its Chinese and international e-commerce segments, Alibaba operates in the \"wholesale\" segment. This facet involves collaboration with Chinese factories, functioning in a producer-to-consumer model. Notably, the cost per unit decreases with higher purchase quantities.Projections indicate an anticipated growth rate of 8.21% for the Chinese e-commerce market throughout 2027. In contrast, the global e-commerce market is expected to experience a more robust growth rate of approximately 15% by 2032.StatistaPrecedence ResearchLocal Consumer ServicesThe Local Consumer Services segment of Alibaba encompasses a range of diverse services designed to cater to various consumer needs. Among these services are Ele.me, a prominent on-demand delivery platform, Amap, providing digital mapping services along with real-time traffic information, Fliggy, an online travel platform, and Taoxianda, a platform aiding retailers in establishing and managing online stores.Cainiao - Platform Delivery ChinaCainiao, a company 70% owned by Alibaba following its acquisition of the majority stake in 2017, specializes in logistics. Serving as a crucial complement to Alibaba's e-commerce operations in China, Cainiao plays a pivotal role in ensuring timely deliveries within China, often achieving the impressive feat of completing deliveries in less than 24 hours.Notably, the platform delivery segment has experienced recent growth, propelled by the surge in e-commerce sales. Projections indicate a continued growth rate of 5.15% for this market throughout 2027.Author's Calculations with base on StatistaCloud - ChinaAlibaba also boasts a formidable presence in the cloud segment, initially slated for a significant spinoff as part of a major strategic plan. This move garnered widespread acclaim from investors, given the robust prospects of the cloud market in China. Projections estimate a noteworthy growth rate of 20.44%, and the autonomy of an independent Alibaba Cloud company is anticipated to drive rapid revenue expansion and robust cash-flow growth, particularly considering the high profitability associated with cloud services.Notably, the projected growth rate of 20.44% for the Chinese cloud market closely aligns with the impressive revenue growth that Alibaba has consistently demonstrated within its cloud segment.Author's Calculations with base on StatistaDigital Media & Entertainment - ChinaThe final segment in Alibaba's diverse portfolio is Digital Media and Entertainment, featuring key components such as Youku, a prominent video platform, and Alibaba Pictures, which encompasses intellectual property, licensing, and cinema ticketing management for the movie industry. Additionally, the company provides other content platforms and engages in the online gaming sector.Projections for the digital media market in China are optimistic, with an expected growth rate of 10.88%. This growth is anticipated to be fueled by the increasing revenue per user, projected to experience a substantial uptick of 7.6% from 2023 to 2027.StatistaStatistaFinancialAlibaba has demonstrated remarkable revenue growth over the past six years. Since FY2018, the company has achieved an annual revenue growth rate of 35.68%. However, in a recent development, Alibaba experienced its first decline in revenue, with a year-over-year reduction of 5.97%.What stands out is the company's ability to consistently grow its net income, a crucial factor influencing a discounted cash flow (\"DCF\") model. The net income has grown at a commendable annual rate of 15.57%, currently standing at $18.16 billion, though below the 2021 all-time high of $22.98 billion.In terms of margins, a noticeable downward trend is observed in both operating margin and net income margin. In FY2018, these metrics were above 25%, with the operating margin at 28.21% and the net income margin at 25.61%. As of the latest earnings release, both metrics have decreased to 14.66% and 14.50%, respectively.Author's CalculationsAuthor's CalculationsAlibaba's financial foundation appears robust, with a substantial cash reserve of $78.66 billion and a comparatively low debt burden. Long-term debt stands at $21.71 billion, while short-term debt is at $5.4 billion.Author's CalculationsDespite the overall positive financial outlook, Alibaba's free cash flow has experienced annual growth of 9.38%. The free cash flow margin, however, has seen a significant decrease from FY2018's 36.6% to the current level of 18.2%. This indicates a potential decrease in efficiency, and Alibaba attributes this shift to the presence of project-based contracts, which inherently have lower margins. The company is actively working to reduce the impact of these contracts to enhance overall margins.Author's CalculationsAuthor's CalculationsAuthor's CalculationsValuationIn this valuation of Alibaba, I will employ two distinct models: the first relies on analysts' estimates for revenue and net income, while the second model involves my own estimates formulated from scratch. These estimates are based on the anticipated growth rates within the markets of each of Alibaba's operating segments.The table below outlines the assumptions integral to calculating Alibaba's fair stock price. Notably, D&A, interest expenses, and CapEx will be computed using margins tied to revenue.Ultimately, the WACC will be derived from variables such as equity value, debt value, and the cost of debt, utilizing the widely recognized formula.For FY2023 and FY2024, analysts anticipate revenues of $133.3 billion and $145.93 billion, respectively. Subsequently, for FY2026-2029, I will apply an expected forward revenue growth rate of 4.87%.TABLE OF ASSUMPTIONS(Current data)Assumptions Part 1Equity Value141,772.60Debt Value27,182.30Cost of Debt3.49%Tax Rate12.76%10y Treasury4.80%Beta0.89Market Return10.50%Cost of Equity9.87%Assumptions Part 2CapEx4,702.10Capex Margin3.75%Net Income18,168.20Interest948.40Tax2,656.80D&A6,245.60Ebitda28,019.00D&A Margin4.98%Interest Expense Margin0.76%Revenue125,311.9Analysts' EstimatesFor FY2023 and FY2024, analysts are anticipating revenues of $133.3 billion and $145.93 billion, respectively. Looking ahead to FY2026-2029, a forward revenue growth rate of 4.87% will be applied.In terms of net income, analysts project an EPS of $8.92, translating to a net income of $22.63 billion for FY2024. For FY2025, the estimate increases to an EPS of $9.75, corresponding to a net income of $24.74 billion. Subsequently, for FY2026-2029, the anticipated 3-5 year long-term expected EPS growth rate of 17.45% will be applied.RevenueNet IncomePlus TaxesPlus D&APlus Interest2023$133,310.0$22,634.50$25,522.15$32,104.47$33,104.002024$145,930.0$24,740.63$27,896.97$34,479.29$35,478.822025$152,715.7$29,057.86$32,764.99$40,305.48$41,450.522026$159,817.0$34,128.46$38,482.48$46,373.61$47,571.882027$167,248.5$40,083.88$45,197.68$53,455.74$54,709.732028$175,025.6$47,078.51$53,084.67$61,726.73$63,039.04^Final EBITA^Author's CalculationsThe initial model suggests that Alibaba is undervalued by a significant margin, approximately 161.9%. According to this model, the fair stock price is estimated to be $204.9, closely aligning with the stock price on July 9, 2021, when the stock traded at $205.94, a period within the onset of the bear market.Additionally, the model indicates a projected future stock price of $274.7. This implies a potential gain of 41.9% until 2028, aligning with Alibaba's FY2029.Seeking AlphaMy EstimatesIn this alternative model, I have projected the growth of each of Alibaba's segments based on the expected CAGR in their respective markets. The Chinese Retail & Wholesale segments are forecasted to grow at a CAGR of 8.21%, International Retail & Wholesale at 15%, Cainiao in the Platform Delivery market at 5.15%, Chinese cloud at 20.44%, and Chinese Digital Media & Entertainment at a rate of 10.88%. For Local Consumer Services, where estimating revenues is challenging, a conservative growth rate of 5% has been applied, which is notably below the current YoY growth of 16% for this segment.Author's CalculationsRevenueNet IncomePlus TaxesPlus D&APlus InterestFY 2024$125,311.9$18,170.23$20,488.34$26,733.94$27,682.34FY 2025$137,322.4$19,911.75$22,452.04$28,697.64$29,646.04FY 2026$150,693.7$21,850.58$24,638.23$32,148.86$33,289.36FY 2027$165,610.7$24,013.55$27,077.14$35,331.25$36,584.65FY 2028$182,287.9$26,431.75$29,803.84$38,889.16$40,268.77FY 2029$200,974.3$29,141.27$32,859.04$42,875.69$44,396.73^Final EBITA^Author's CalculationsThis more conservative model suggests a fair price of $148.1, indicating an upside of 89.3% from the current stock price of $78.2. Looking ahead to FY2029, the projected stock price is $184.2, translating into annual returns of 22.6%. While not as high as the previous model, these returns are still substantial and attractive.Risks to ThesisThe primary risk factor in this bullish thesis revolves around the influence exerted by the Chinese Government. The government's control over corporations, as evidenced by the halt in the Ant Group's IPO in Hong Kong, poses a considerable risk. If there were a concerted effort to sideline Jack Ma, a key figure in the company's direction, it could deliver a significant intellectual blow to Alibaba. In such a scenario, the company would need to secure an equally capable protector, given Ma's influential role despite not holding the CEO position.Secondly, there exists the risk of a severe Chinese recession impacting Alibaba's sales volume. With over 65% of e-commerce revenues hinging on the Chinese market, the company is vulnerable to economic downturns. This vulnerability extends beyond e-commerce to include entertainment platforms and Cainiao, which is intricately tied to e-commerce operations.Lastly, there is the risk of a foreign competitor, such as Amazon.com, Inc. (AMZN), succeeding in growing aggressively within the Chinese market. Alibaba's lack of logistical infrastructure in the US to counterbalance Amazon's influence could position the company unfavorably in the long term. To mitigate this risk, Alibaba would need to consider strategic expansion into other markets.ConclusionIn conclusion, Alibaba Group Holdings Limited emerges as a compelling investment opportunity marked by a resilient business model and diversified revenue streams. Despite recent challenges and regulatory uncertainties, the company's strategic segments, including e-commerce, cloud, and logistics, showcase robust growth potential domestically and internationally.Throughout two DCF models, we observe that Alibaba's undervaluation could be as high as 161.9% considering analysts' estimates. However, to make it more conservative, I conducted my own estimates which suggest that Alibaba is undervalued by 89.3%. After conducting the two models, I am assigning Alibaba a stock price target of $148.1, which is an 89.3% upside from the current stock price of $78.2. Furthermore, the stock could reach a price of $184.2 in FY 2029 (year 2028), which translates into 22.4% annual returns.The undervaluation indicators, coupled with the recent stock pullback, suggest this is an attractive entry point for Alibaba Group Holding Limited stock, but investors must remain vigilant to risks associated with governmental influence, economic downturns, and foreign competition. Alibaba's adeptness in navigating these challenges, coupled with its financial strength and strategic positioning, positions it favorably for long-term growth.Editor's Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.","kind":null,"is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[{"id":244571670302816,"gmtCreate":1700733985637,"gmtModify":1700733989570,"author":{"id":"3585634044713216","authorId":"3585634044713216","name":"Kong123","avatar":"https://community-static.tradeup.com/news/b98348643175392a7296a947f9f8739a","vip":1,"hat":"https://static.tigerbbs.com/0a8758340a08196056f8bc1e54805193","crmLevel":8,"crmLevelSwitch":0,"idStr":"3585634044713216","authorIdStr":"3585634044713216"},"htmlText":"Yes, agree","listText":"Yes, agree","text":"Yes, agree","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":4,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/244571670302816","repostId":2385466779,"repostType":2,"repost":{"id":"2385466779","pubTimestamp":1700722800,"share":"https://ttm.financial/m/news/2385466779?lang=&edition=fundamental","pubTime":"2023-11-23 15:00","market":"us","language":"en","title":"Alibaba Is Hugely Undervalued?","url":"https://stock-news.laohu8.com/highlight/detail?id=2385466779","media":"Seeking Alpha","summary":"Alibaba Group Holding Limited offers a compelling investment opportunity with a diversified portfolio spanning e-commerce, cloud services, logistics, and digital media, providing resilience in a dynam","content":"<html><head></head><body><ul style=\"\"><li>Alibaba Group Holding Limited offers a compelling investment opportunity with a diversified portfolio spanning e-commerce, cloud services, logistics, and digital media, providing resilience in a dynamic market.</li><li>Despite recent challenges and regulatory uncertainties, Alibaba&#39;s strategic segments, both domestically and internationally, showcase robust growth potential, emphasizing the company&#39;s adaptability and innovation.</li><li>The recent stock pullback, coupled with an undervaluation that could be as high as 161.9%, presents an attractive entry point for investors looking to capitalize on Alibaba&#39;s long-term growth prospects.</li><li>Investors must remain vigilant to potential risks, including governmental influence, economic downturns, and competition from foreign players, acknowledging the nuanced balance between Alibaba&#39;s strengths and external factors.</li><li>Alibaba&#39;s solid financial foundation, diversified revenue streams, and strategic positioning position it favorably for long-term growth, making it a promising investment choice.</li></ul><img src=\"https://static.tigerbbs.com/84b6aeab08dc480ef3a214462aadfcfd\" title=\"Robert Way\" tg-width=\"750\" tg-height=\"500\"/>Robert Way<h2 id=\"id_522885472\">Thesis</h2>After the release of FQ2 2024, Alibaba Group Holding Limited (NYSE:BABA) experienced a 10% decline as the company fell short of revenue expectations by $250 million, despite EPS estimates. Additionally, the company abandoned its plans to spin off its cloud business, citing uncertainties in the growth trajectory caused by the U.S.-imposed restrictions on AI chip imports.Nevertheless, in this article, I will elucidate using two valuation models why Alibaba is significantly undervalued, marking an undervaluation of up to 80%. This substantial undervaluation provides a considerable margin of security for investors, warranting a &#34;strong buy&#34; recommendation. I propose a fair price of $148.1 for the stock.<h2 id=\"id_1987249582\">Overview</h2><img src=\"https://static.tigerbbs.com/081c2dd239fb542c7136a40c1b6c2ad1\" alt=\"FQ2 2024 Alibaba\" title=\"FQ2 2024 Alibaba\" tg-width=\"640\" tg-height=\"133\"/>FQ2 2024 Alibaba<img src=\"https://static.tigerbbs.com/e6bb4b66323db07420db79ea50a4c420\" alt=\"FY 2023\" title=\"FY 2023\" tg-width=\"640\" tg-height=\"417\"/>FY 2023<h3 id=\"id_3914187007\">Q2 2024 Earnings</h3>In FQ2 2024, Alibaba outperformed expectations in earnings but fell short on revenue, with a notable miss of $230 million. Despite this, the company reported an impressive EPS of $2.14, surpassing the consensus by $0.05.The most significant blow to these earnings results came as Alibaba opted to abandon its plan to spin off its cloud business. The rationale behind this decision was a belief that the spin-off would not deliver the anticipated shareholder value. Furthermore, the company pointed to the current export restrictions on AI chips imposed by the U.S., which has cast uncertainty over the prospects of its cloud segment.Adding to the challenges, Alibaba disclosed that Jack Ma&#39;s family trust intends to sell 10 million shares valued at $870.71 million on November 21.<h3 id=\"id_2851468396\">Market</h3><h4 id=\"id_4264278908\">E-Commerce China</h4>Alibaba&#39;s primary focus lies in e-commerce, as illustrated in the table below, with a significant dependency on China, representing 67% of this segment. However, since 2021, Alibaba has successfully reduced its reliance on the Chinese market by 3%.In addition to its Chinese and international e-commerce segments, Alibaba operates in the &#34;wholesale&#34; segment. This facet involves collaboration with Chinese factories, functioning in a producer-to-consumer model. Notably, the cost per unit decreases with higher purchase quantities.Projections indicate an anticipated growth rate of 8.21% for the Chinese e-commerce market throughout 2027. In contrast, the global e-commerce market is expected to experience a more robust growth rate of approximately 15% by 2032.<img src=\"https://static.tigerbbs.com/cb5ffc078e262abf6dae01b3008e5789\" alt=\"Statista\" title=\"Statista\" tg-width=\"640\" tg-height=\"340\"/>Statista<img src=\"https://static.tigerbbs.com/fa869592dad3d103e32094e603a07313\" alt=\"Precedence Research\" title=\"Precedence Research\" tg-width=\"1000\" tg-height=\"592\"/>Precedence Research<h4 id=\"id_21983917\">Local Consumer Services</h4>The Local Consumer Services segment of Alibaba encompasses a range of diverse services designed to cater to various consumer needs. Among these services are Ele.me, a prominent on-demand delivery platform, Amap, providing digital mapping services along with real-time traffic information, Fliggy, an online travel platform, and Taoxianda, a platform aiding retailers in establishing and managing online stores.<h4 id=\"id_2699114686\">Cainiao - Platform Delivery China</h4>Cainiao, a company 70% owned by Alibaba following its acquisition of the majority stake in 2017, specializes in logistics. Serving as a crucial complement to Alibaba&#39;s e-commerce operations in China, Cainiao plays a pivotal role in ensuring timely deliveries within China, often achieving the impressive feat of completing deliveries in less than 24 hours.Notably, the platform delivery segment has experienced recent growth, propelled by the surge in e-commerce sales. Projections indicate a continued growth rate of 5.15% for this market throughout 2027.<img src=\"https://static.tigerbbs.com/bd03ba9b4a58c40599efe510d0bd95e0\" alt=\"Author&#39;s Calculations with base on Statista\" title=\"Author&#39;s Calculations with base on Statista\" tg-width=\"640\" tg-height=\"385\"/>Author&#39;s Calculations with base on Statista<h4 id=\"id_2806472205\">Cloud - China</h4>Alibaba also boasts a formidable presence in the cloud segment, initially slated for a significant spinoff as part of a major strategic plan. This move garnered widespread acclaim from investors, given the robust prospects of the cloud market in China. Projections estimate a noteworthy growth rate of 20.44%, and the autonomy of an independent Alibaba Cloud company is anticipated to drive rapid revenue expansion and robust cash-flow growth, particularly considering the high profitability associated with cloud services.Notably, the projected growth rate of 20.44% for the Chinese cloud market closely aligns with the impressive revenue growth that Alibaba has consistently demonstrated within its cloud segment.<img src=\"https://static.tigerbbs.com/2c83a9ff7534361801c44c57f6842844\" alt=\"Author&#39;s Calculations with base on Statista\" title=\"Author&#39;s Calculations with base on Statista\" tg-width=\"640\" tg-height=\"385\"/>Author&#39;s Calculations with base on Statista<h4 id=\"id_1524553402\">Digital Media &amp; Entertainment - China</h4>The final segment in Alibaba&#39;s diverse portfolio is Digital Media and Entertainment, featuring key components such as Youku, a prominent video platform, and Alibaba Pictures, which encompasses intellectual property, licensing, and cinema ticketing management for the movie industry. Additionally, the company provides other content platforms and engages in the online gaming sector.Projections for the digital media market in China are optimistic, with an expected growth rate of 10.88%. This growth is anticipated to be fueled by the increasing revenue per user, projected to experience a substantial uptick of 7.6% from 2023 to 2027.<img src=\"https://static.tigerbbs.com/68b6148617c06e49a88276236a24288e\" alt=\"Statista\" title=\"Statista\" tg-width=\"640\" tg-height=\"402\"/>Statista<img src=\"https://static.tigerbbs.com/d15ed857ad6619ed880668554372e704\" alt=\"Statista\" title=\"Statista\" tg-width=\"640\" tg-height=\"378\"/>Statista<h2 id=\"id_3984174781\">Financial</h2>Alibaba has demonstrated remarkable revenue growth over the past six years. Since FY2018, the company has achieved an annual revenue growth rate of 35.68%. However, in a recent development, Alibaba experienced its first decline in revenue, with a year-over-year reduction of 5.97%.What stands out is the company&#39;s ability to consistently grow its net income, a crucial factor influencing a discounted cash flow (&#34;DCF&#34;) model. The net income has grown at a commendable annual rate of 15.57%, currently standing at $18.16 billion, though below the 2021 all-time high of $22.98 billion.In terms of margins, a noticeable downward trend is observed in both operating margin and net income margin. In FY2018, these metrics were above 25%, with the operating margin at 28.21% and the net income margin at 25.61%. As of the latest earnings release, both metrics have decreased to 14.66% and 14.50%, respectively.<img src=\"https://static.tigerbbs.com/960c6966b32c3d6338927f89928133eb\" alt=\"Author&#39;s Calculations\" title=\"Author&#39;s Calculations\" tg-width=\"640\" tg-height=\"384\"/>Author&#39;s Calculations<img src=\"https://static.tigerbbs.com/c879d4d20ebba8a4b090bf207e7fdaa6\" alt=\"Author&#39;s Calculations\" title=\"Author&#39;s Calculations\" tg-width=\"640\" tg-height=\"389\"/>Author&#39;s CalculationsAlibaba&#39;s financial foundation appears robust, with a substantial cash reserve of $78.66 billion and a comparatively low debt burden. Long-term debt stands at $21.71 billion, while short-term debt is at $5.4 billion.<img src=\"https://static.tigerbbs.com/29d34db56f2ac763355ca3f8ce4693ef\" alt=\"Author&#39;s Calculations\" title=\"Author&#39;s Calculations\" tg-width=\"640\" tg-height=\"391\"/>Author&#39;s CalculationsDespite the overall positive financial outlook, Alibaba&#39;s free cash flow has experienced annual growth of 9.38%. The free cash flow margin, however, has seen a significant decrease from FY2018&#39;s 36.6% to the current level of 18.2%. This indicates a potential decrease in efficiency, and Alibaba attributes this shift to the presence of project-based contracts, which inherently have lower margins. The company is actively working to reduce the impact of these contracts to enhance overall margins.<img src=\"https://static.tigerbbs.com/bd64025d13a547be8d4e59fe5383e405\" alt=\"Author&#39;s Calculations\" title=\"Author&#39;s Calculations\" tg-width=\"640\" tg-height=\"461\"/>Author&#39;s Calculations<img src=\"https://static.tigerbbs.com/b5ab121ecbf172e600e9baf213607a57\" alt=\"Author&#39;s Calculations\" title=\"Author&#39;s Calculations\" tg-width=\"640\" tg-height=\"476\"/>Author&#39;s Calculations<img src=\"https://static.tigerbbs.com/1e791c46f8ca163f7aa30e11f9d6c939\" alt=\"Author&#39;s Calculations\" title=\"Author&#39;s Calculations\" tg-width=\"640\" tg-height=\"358\"/>Author&#39;s Calculations<h2 id=\"id_3734509088\">Valuation</h2>In this valuation of Alibaba, I will employ two distinct models: the first relies on analysts&#39; estimates for revenue and net income, while the second model involves my own estimates formulated from scratch. These estimates are based on the anticipated growth rates within the markets of each of Alibaba&#39;s operating segments.The table below outlines the assumptions integral to calculating Alibaba&#39;s fair stock price. Notably, D&amp;A, interest expenses, and CapEx will be computed using margins tied to revenue.Ultimately, the WACC will be derived from variables such as equity value, debt value, and the cost of debt, utilizing the widely recognized formula.For FY2023 and FY2024, analysts anticipate revenues of $133.3 billion and $145.93 billion, respectively. Subsequently, for FY2026-2029, I will apply an expected forward revenue growth rate of 4.87%.<table style=\"border-collapse:collapse;\"><colgroup><col/><col/></colgroup><tbody><tr><td colspan=\"2\" style=\"text-align:left;\">TABLE OF ASSUMPTIONS</td></tr><tr><td style=\"text-align:left;\">(Current data)</td><td style=\"text-align:left;\"></td></tr><tr><td style=\"text-align:left;\">Assumptions Part 1</td><td style=\"text-align:left;\"></td></tr><tr><td style=\"text-align:left;\"></td><td style=\"text-align:left;\"></td></tr><tr><td style=\"text-align:left;\">Equity Value</td><td style=\"text-align:left;\">141,772.60</td></tr><tr><td style=\"text-align:left;\">Debt Value</td><td style=\"text-align:left;\">27,182.30</td></tr><tr><td style=\"text-align:left;\">Cost of Debt</td><td style=\"text-align:left;\">3.49%</td></tr><tr><td style=\"text-align:left;\">Tax Rate</td><td style=\"text-align:left;\">12.76%</td></tr><tr><td style=\"text-align:left;\">10y Treasury</td><td style=\"text-align:left;\">4.80%</td></tr><tr><td style=\"text-align:left;\">Beta</td><td style=\"text-align:left;\">0.89</td></tr><tr><td style=\"text-align:left;\">Market Return</td><td style=\"text-align:left;\">10.50%</td></tr><tr><td style=\"text-align:left;\">Cost of Equity</td><td style=\"text-align:left;\">9.87%</td></tr><tr><td style=\"text-align:left;\">Assumptions Part 2</td><td style=\"text-align:left;\"></td></tr><tr><td style=\"text-align:left;\">CapEx</td><td style=\"text-align:left;\">4,702.10</td></tr><tr><td style=\"text-align:left;\">Capex Margin</td><td style=\"text-align:left;\">3.75%</td></tr><tr><td style=\"text-align:left;\">Net Income</td><td style=\"text-align:left;\">18,168.20</td></tr><tr><td style=\"text-align:left;\">Interest</td><td style=\"text-align:left;\">948.40</td></tr><tr><td style=\"text-align:left;\">Tax</td><td style=\"text-align:left;\">2,656.80</td></tr><tr><td style=\"text-align:left;\">D&amp;A</td><td style=\"text-align:left;\">6,245.60</td></tr><tr><td style=\"text-align:left;\">Ebitda</td><td style=\"text-align:left;\">28,019.00</td></tr><tr><td style=\"text-align:left;\"></td><td style=\"text-align:left;\"></td></tr><tr><td style=\"text-align:left;\">D&amp;A Margin</td><td style=\"text-align:left;\">4.98%</td></tr><tr><td style=\"text-align:left;\">Interest Expense Margin</td><td style=\"text-align:left;\">0.76%</td></tr><tr><td style=\"text-align:left;\">Revenue</td><td style=\"text-align:left;\">125,311.9</td></tr></tbody></table><h3 id=\"id_56021089\">Analysts&#39; Estimates</h3>For FY2023 and FY2024, analysts are anticipating revenues of $133.3 billion and $145.93 billion, respectively. Looking ahead to FY2026-2029, a forward revenue growth rate of 4.87% will be applied.In terms of net income, analysts project an EPS of $8.92, translating to a net income of $22.63 billion for FY2024. For FY2025, the estimate increases to an EPS of $9.75, corresponding to a net income of $24.74 billion. Subsequently, for FY2026-2029, the anticipated 3-5 year long-term expected EPS growth rate of 17.45% will be applied.<table style=\"border-collapse:collapse;\"><colgroup><col/><col/><col/><col/><col/><col/></colgroup><tbody><tr><td style=\"text-align:left;\"></td><td style=\"text-align:left;\">Revenue</td><td style=\"text-align:left;\">Net Income</td><td style=\"text-align:left;\">Plus Taxes</td><td style=\"text-align:left;\">Plus D&amp;A</td><td style=\"text-align:left;\">Plus Interest</td></tr><tr><td style=\"text-align:left;\">2023</td><td style=\"text-align:left;\">$133,310.0</td><td style=\"text-align:left;\">$22,634.50</td><td style=\"text-align:left;\">$25,522.15</td><td style=\"text-align:left;\">$32,104.47</td><td style=\"text-align:left;\">$33,104.00</td></tr><tr><td style=\"text-align:left;\">2024</td><td style=\"text-align:left;\">$145,930.0</td><td style=\"text-align:left;\">$24,740.63</td><td style=\"text-align:left;\">$27,896.97</td><td style=\"text-align:left;\">$34,479.29</td><td style=\"text-align:left;\">$35,478.82</td></tr><tr><td style=\"text-align:left;\">2025</td><td style=\"text-align:left;\">$152,715.7</td><td style=\"text-align:left;\">$29,057.86</td><td style=\"text-align:left;\">$32,764.99</td><td style=\"text-align:left;\">$40,305.48</td><td style=\"text-align:left;\">$41,450.52</td></tr><tr><td style=\"text-align:left;\">2026</td><td style=\"text-align:left;\">$159,817.0</td><td style=\"text-align:left;\">$34,128.46</td><td style=\"text-align:left;\">$38,482.48</td><td style=\"text-align:left;\">$46,373.61</td><td style=\"text-align:left;\">$47,571.88</td></tr><tr><td style=\"text-align:left;\">2027</td><td style=\"text-align:left;\">$167,248.5</td><td style=\"text-align:left;\">$40,083.88</td><td style=\"text-align:left;\">$45,197.68</td><td style=\"text-align:left;\">$53,455.74</td><td style=\"text-align:left;\">$54,709.73</td></tr><tr><td style=\"text-align:left;\">2028</td><td style=\"text-align:left;\">$175,025.6</td><td style=\"text-align:left;\">$47,078.51</td><td style=\"text-align:left;\">$53,084.67</td><td style=\"text-align:left;\">$61,726.73</td><td style=\"text-align:left;\">$63,039.04</td></tr><tr><td style=\"text-align:left;\"></td><td style=\"text-align:left;\"></td><td style=\"text-align:left;\"></td><td style=\"text-align:left;\"></td><td style=\"text-align:left;\"></td><td style=\"text-align:left;\">^Final EBITA^</td></tr></tbody></table><img src=\"https://static.tigerbbs.com/90a2b3d81905562e6d4cd4d6443240d7\" alt=\"Author&#39;s Calculations\" title=\"Author&#39;s Calculations\" tg-width=\"640\" tg-height=\"679\"/>Author&#39;s CalculationsThe initial model suggests that Alibaba is undervalued by a significant margin, approximately 161.9%. According to this model, the fair stock price is estimated to be $204.9, closely aligning with the stock price on July 9, 2021, when the stock traded at $205.94, a period within the onset of the bear market.Additionally, the model indicates a projected future stock price of $274.7. This implies a potential gain of 41.9% until 2028, aligning with Alibaba&#39;s FY2029.<img src=\"https://static.tigerbbs.com/0901371041fe275255a832be806605b0\" alt=\"Seeking Alpha\" title=\"Seeking Alpha\" tg-width=\"640\" tg-height=\"344\"/>Seeking Alpha<h3 id=\"id_3561401362\">My Estimates</h3>In this alternative model, I have projected the growth of each of Alibaba&#39;s segments based on the expected CAGR in their respective markets. The Chinese Retail &amp; Wholesale segments are forecasted to grow at a CAGR of 8.21%, International Retail &amp; Wholesale at 15%, Cainiao in the Platform Delivery market at 5.15%, Chinese cloud at 20.44%, and Chinese Digital Media &amp; Entertainment at a rate of 10.88%. For Local Consumer Services, where estimating revenues is challenging, a conservative growth rate of 5% has been applied, which is notably below the current YoY growth of 16% for this segment.<img src=\"https://static.tigerbbs.com/a0aba12ef54f1700a42b67ae82e18682\" alt=\"Author&#39;s Calculations\" title=\"Author&#39;s Calculations\" tg-width=\"640\" tg-height=\"98\"/>Author&#39;s Calculations<table style=\"border-collapse:collapse;\"><colgroup><col/><col/><col/><col/><col/><col/></colgroup><tbody><tr><td style=\"text-align:left;\"></td><td style=\"text-align:left;\">Revenue</td><td style=\"text-align:left;\">Net Income</td><td style=\"text-align:left;\">Plus Taxes</td><td style=\"text-align:left;\">Plus D&amp;A</td><td style=\"text-align:left;\">Plus Interest</td></tr><tr><td style=\"text-align:left;\">FY 2024</td><td style=\"text-align:left;\">$125,311.9</td><td style=\"text-align:left;\">$18,170.23</td><td style=\"text-align:left;\">$20,488.34</td><td style=\"text-align:left;\">$26,733.94</td><td style=\"text-align:left;\">$27,682.34</td></tr><tr><td style=\"text-align:left;\">FY 2025</td><td style=\"text-align:left;\">$137,322.4</td><td style=\"text-align:left;\">$19,911.75</td><td style=\"text-align:left;\">$22,452.04</td><td style=\"text-align:left;\">$28,697.64</td><td style=\"text-align:left;\">$29,646.04</td></tr><tr><td style=\"text-align:left;\">FY 2026</td><td style=\"text-align:left;\">$150,693.7</td><td style=\"text-align:left;\">$21,850.58</td><td style=\"text-align:left;\">$24,638.23</td><td style=\"text-align:left;\">$32,148.86</td><td style=\"text-align:left;\">$33,289.36</td></tr><tr><td style=\"text-align:left;\">FY 2027</td><td style=\"text-align:left;\">$165,610.7</td><td style=\"text-align:left;\">$24,013.55</td><td style=\"text-align:left;\">$27,077.14</td><td style=\"text-align:left;\">$35,331.25</td><td style=\"text-align:left;\">$36,584.65</td></tr><tr><td style=\"text-align:left;\">FY 2028</td><td style=\"text-align:left;\">$182,287.9</td><td style=\"text-align:left;\">$26,431.75</td><td style=\"text-align:left;\">$29,803.84</td><td style=\"text-align:left;\">$38,889.16</td><td style=\"text-align:left;\">$40,268.77</td></tr><tr><td style=\"text-align:left;\">FY 2029</td><td style=\"text-align:left;\">$200,974.3</td><td style=\"text-align:left;\">$29,141.27</td><td style=\"text-align:left;\">$32,859.04</td><td style=\"text-align:left;\">$42,875.69</td><td style=\"text-align:left;\">$44,396.73</td></tr><tr><td style=\"text-align:left;\"></td><td style=\"text-align:left;\"></td><td style=\"text-align:left;\"></td><td style=\"text-align:left;\"></td><td style=\"text-align:left;\"></td><td style=\"text-align:left;\">^Final EBITA^</td></tr></tbody></table>Author&#39;s CalculationsThis more conservative model suggests a fair price of $148.1, indicating an upside of 89.3% from the current stock price of $78.2. Looking ahead to FY2029, the projected stock price is $184.2, translating into annual returns of 22.6%. While not as high as the previous model, these returns are still substantial and attractive.<h2 id=\"id_3686040600\">Risks to Thesis</h2>The primary risk factor in this bullish thesis revolves around the influence exerted by the Chinese Government. The government&#39;s control over corporations, as evidenced by the halt in the Ant Group&#39;s IPO in Hong Kong, poses a considerable risk. If there were a concerted effort to sideline Jack Ma, a key figure in the company&#39;s direction, it could deliver a significant intellectual blow to Alibaba. In such a scenario, the company would need to secure an equally capable protector, given Ma&#39;s influential role despite not holding the CEO position.Secondly, there exists the risk of a severe Chinese recession impacting Alibaba&#39;s sales volume. With over 65% of e-commerce revenues hinging on the Chinese market, the company is vulnerable to economic downturns. This vulnerability extends beyond e-commerce to include entertainment platforms and Cainiao, which is intricately tied to e-commerce operations.Lastly, there is the risk of a foreign competitor, such as Amazon.com, Inc. (AMZN), succeeding in growing aggressively within the Chinese market. Alibaba&#39;s lack of logistical infrastructure in the US to counterbalance Amazon&#39;s influence could position the company unfavorably in the long term. To mitigate this risk, Alibaba would need to consider strategic expansion into other markets.<h2 id=\"id_2850560331\">Conclusion</h2>In conclusion, Alibaba Group Holdings Limited emerges as a compelling investment opportunity marked by a resilient business model and diversified revenue streams. Despite recent challenges and regulatory uncertainties, the company&#39;s strategic segments, including e-commerce, cloud, and logistics, showcase robust growth potential domestically and internationally.Throughout two DCF models, we observe that Alibaba&#39;s undervaluation could be as high as 161.9% considering analysts&#39; estimates. However, to make it more conservative, I conducted my own estimates which suggest that Alibaba is undervalued by 89.3%. After conducting the two models, I am assigning Alibaba a stock price target of $148.1, which is an 89.3% upside from the current stock price of $78.2. Furthermore, the stock could reach a price of $184.2 in FY 2029 (year 2028), which translates into 22.4% annual returns.The undervaluation indicators, coupled with the recent stock pullback, suggest this is an attractive entry point for Alibaba Group Holding Limited stock, but investors must remain vigilant to risks associated with governmental influence, economic downturns, and foreign competition. Alibaba&#39;s adeptness in navigating these challenges, coupled with its financial strength and strategic positioning, positions it favorably for long-term growth.Editor&#39;s Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.</body></html>","source":"seekingalpha","collect":0,"html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Alibaba Is Hugely Undervalued?</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nAlibaba Is Hugely Undervalued?\n</h2>\n\n<h4 class=\"meta\">\n\n\n2023-11-23 15:00 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4653737-alibaba-is-hugely-undervalued>Seeking Alpha</a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\nAlibaba Group Holding Limited offers a compelling investment opportunity with a diversified portfolio spanning e-commerce, cloud services, logistics, and digital media, providing resilience in a ...\n\n<a href=\"https://seekingalpha.com/article/4653737-alibaba-is-hugely-undervalued\">Web Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","type":0,"thumbnail":"","relate_stocks":{"LU0053666078.USD":"摩根大通基金-美国股票A（离岸）美元","IE00B19Z9505.USD":"美盛-美国大盘成长股A Acc","LU0079474960.USD":"联博美国增长基金A","BK4559":"巴菲特持仓","BK4538":"云计算","LU0082616367.USD":"摩根大通美国科技A（dist）","GB00BDT5M118.USD":"天利环球扩展Alpha基金A Acc","09988":"阿里巴巴-W","IE0004445239.USD":"JANUS HENDERSON US FORTY \"A2\" (USD) ACC","BK4550":"红杉资本持仓","LU0061474960.USD":"天利环球焦点基金AU Acc","LU0353189680.USD":"富国美国全盘成长基金Cl A Acc","BK4122":"互联网与直销零售","LU0072913022.USD":"UBS (LUX) EQUITY FUND - 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Additionally, the company abandoned its plans to spin off its cloud business, citing uncertainties in the growth trajectory caused by the U.S.-imposed restrictions on AI chip imports.Nevertheless, in this article, I will elucidate using two valuation models why Alibaba is significantly undervalued, marking an undervaluation of up to 80%. This substantial undervaluation provides a considerable margin of security for investors, warranting a \"strong buy\" recommendation. I propose a fair price of $148.1 for the stock.OverviewFQ2 2024 AlibabaFY 2023Q2 2024 EarningsIn FQ2 2024, Alibaba outperformed expectations in earnings but fell short on revenue, with a notable miss of $230 million. Despite this, the company reported an impressive EPS of $2.14, surpassing the consensus by $0.05.The most significant blow to these earnings results came as Alibaba opted to abandon its plan to spin off its cloud business. The rationale behind this decision was a belief that the spin-off would not deliver the anticipated shareholder value. Furthermore, the company pointed to the current export restrictions on AI chips imposed by the U.S., which has cast uncertainty over the prospects of its cloud segment.Adding to the challenges, Alibaba disclosed that Jack Ma's family trust intends to sell 10 million shares valued at $870.71 million on November 21.MarketE-Commerce ChinaAlibaba's primary focus lies in e-commerce, as illustrated in the table below, with a significant dependency on China, representing 67% of this segment. However, since 2021, Alibaba has successfully reduced its reliance on the Chinese market by 3%.In addition to its Chinese and international e-commerce segments, Alibaba operates in the \"wholesale\" segment. This facet involves collaboration with Chinese factories, functioning in a producer-to-consumer model. Notably, the cost per unit decreases with higher purchase quantities.Projections indicate an anticipated growth rate of 8.21% for the Chinese e-commerce market throughout 2027. In contrast, the global e-commerce market is expected to experience a more robust growth rate of approximately 15% by 2032.StatistaPrecedence ResearchLocal Consumer ServicesThe Local Consumer Services segment of Alibaba encompasses a range of diverse services designed to cater to various consumer needs. Among these services are Ele.me, a prominent on-demand delivery platform, Amap, providing digital mapping services along with real-time traffic information, Fliggy, an online travel platform, and Taoxianda, a platform aiding retailers in establishing and managing online stores.Cainiao - Platform Delivery ChinaCainiao, a company 70% owned by Alibaba following its acquisition of the majority stake in 2017, specializes in logistics. Serving as a crucial complement to Alibaba's e-commerce operations in China, Cainiao plays a pivotal role in ensuring timely deliveries within China, often achieving the impressive feat of completing deliveries in less than 24 hours.Notably, the platform delivery segment has experienced recent growth, propelled by the surge in e-commerce sales. Projections indicate a continued growth rate of 5.15% for this market throughout 2027.Author's Calculations with base on StatistaCloud - ChinaAlibaba also boasts a formidable presence in the cloud segment, initially slated for a significant spinoff as part of a major strategic plan. This move garnered widespread acclaim from investors, given the robust prospects of the cloud market in China. Projections estimate a noteworthy growth rate of 20.44%, and the autonomy of an independent Alibaba Cloud company is anticipated to drive rapid revenue expansion and robust cash-flow growth, particularly considering the high profitability associated with cloud services.Notably, the projected growth rate of 20.44% for the Chinese cloud market closely aligns with the impressive revenue growth that Alibaba has consistently demonstrated within its cloud segment.Author's Calculations with base on StatistaDigital Media & Entertainment - ChinaThe final segment in Alibaba's diverse portfolio is Digital Media and Entertainment, featuring key components such as Youku, a prominent video platform, and Alibaba Pictures, which encompasses intellectual property, licensing, and cinema ticketing management for the movie industry. Additionally, the company provides other content platforms and engages in the online gaming sector.Projections for the digital media market in China are optimistic, with an expected growth rate of 10.88%. This growth is anticipated to be fueled by the increasing revenue per user, projected to experience a substantial uptick of 7.6% from 2023 to 2027.StatistaStatistaFinancialAlibaba has demonstrated remarkable revenue growth over the past six years. Since FY2018, the company has achieved an annual revenue growth rate of 35.68%. However, in a recent development, Alibaba experienced its first decline in revenue, with a year-over-year reduction of 5.97%.What stands out is the company's ability to consistently grow its net income, a crucial factor influencing a discounted cash flow (\"DCF\") model. The net income has grown at a commendable annual rate of 15.57%, currently standing at $18.16 billion, though below the 2021 all-time high of $22.98 billion.In terms of margins, a noticeable downward trend is observed in both operating margin and net income margin. In FY2018, these metrics were above 25%, with the operating margin at 28.21% and the net income margin at 25.61%. As of the latest earnings release, both metrics have decreased to 14.66% and 14.50%, respectively.Author's CalculationsAuthor's CalculationsAlibaba's financial foundation appears robust, with a substantial cash reserve of $78.66 billion and a comparatively low debt burden. Long-term debt stands at $21.71 billion, while short-term debt is at $5.4 billion.Author's CalculationsDespite the overall positive financial outlook, Alibaba's free cash flow has experienced annual growth of 9.38%. The free cash flow margin, however, has seen a significant decrease from FY2018's 36.6% to the current level of 18.2%. This indicates a potential decrease in efficiency, and Alibaba attributes this shift to the presence of project-based contracts, which inherently have lower margins. The company is actively working to reduce the impact of these contracts to enhance overall margins.Author's CalculationsAuthor's CalculationsAuthor's CalculationsValuationIn this valuation of Alibaba, I will employ two distinct models: the first relies on analysts' estimates for revenue and net income, while the second model involves my own estimates formulated from scratch. These estimates are based on the anticipated growth rates within the markets of each of Alibaba's operating segments.The table below outlines the assumptions integral to calculating Alibaba's fair stock price. Notably, D&A, interest expenses, and CapEx will be computed using margins tied to revenue.Ultimately, the WACC will be derived from variables such as equity value, debt value, and the cost of debt, utilizing the widely recognized formula.For FY2023 and FY2024, analysts anticipate revenues of $133.3 billion and $145.93 billion, respectively. Subsequently, for FY2026-2029, I will apply an expected forward revenue growth rate of 4.87%.TABLE OF ASSUMPTIONS(Current data)Assumptions Part 1Equity Value141,772.60Debt Value27,182.30Cost of Debt3.49%Tax Rate12.76%10y Treasury4.80%Beta0.89Market Return10.50%Cost of Equity9.87%Assumptions Part 2CapEx4,702.10Capex Margin3.75%Net Income18,168.20Interest948.40Tax2,656.80D&A6,245.60Ebitda28,019.00D&A Margin4.98%Interest Expense Margin0.76%Revenue125,311.9Analysts' EstimatesFor FY2023 and FY2024, analysts are anticipating revenues of $133.3 billion and $145.93 billion, respectively. Looking ahead to FY2026-2029, a forward revenue growth rate of 4.87% will be applied.In terms of net income, analysts project an EPS of $8.92, translating to a net income of $22.63 billion for FY2024. For FY2025, the estimate increases to an EPS of $9.75, corresponding to a net income of $24.74 billion. Subsequently, for FY2026-2029, the anticipated 3-5 year long-term expected EPS growth rate of 17.45% will be applied.RevenueNet IncomePlus TaxesPlus D&APlus Interest2023$133,310.0$22,634.50$25,522.15$32,104.47$33,104.002024$145,930.0$24,740.63$27,896.97$34,479.29$35,478.822025$152,715.7$29,057.86$32,764.99$40,305.48$41,450.522026$159,817.0$34,128.46$38,482.48$46,373.61$47,571.882027$167,248.5$40,083.88$45,197.68$53,455.74$54,709.732028$175,025.6$47,078.51$53,084.67$61,726.73$63,039.04^Final EBITA^Author's CalculationsThe initial model suggests that Alibaba is undervalued by a significant margin, approximately 161.9%. According to this model, the fair stock price is estimated to be $204.9, closely aligning with the stock price on July 9, 2021, when the stock traded at $205.94, a period within the onset of the bear market.Additionally, the model indicates a projected future stock price of $274.7. This implies a potential gain of 41.9% until 2028, aligning with Alibaba's FY2029.Seeking AlphaMy EstimatesIn this alternative model, I have projected the growth of each of Alibaba's segments based on the expected CAGR in their respective markets. The Chinese Retail & Wholesale segments are forecasted to grow at a CAGR of 8.21%, International Retail & Wholesale at 15%, Cainiao in the Platform Delivery market at 5.15%, Chinese cloud at 20.44%, and Chinese Digital Media & Entertainment at a rate of 10.88%. For Local Consumer Services, where estimating revenues is challenging, a conservative growth rate of 5% has been applied, which is notably below the current YoY growth of 16% for this segment.Author's CalculationsRevenueNet IncomePlus TaxesPlus D&APlus InterestFY 2024$125,311.9$18,170.23$20,488.34$26,733.94$27,682.34FY 2025$137,322.4$19,911.75$22,452.04$28,697.64$29,646.04FY 2026$150,693.7$21,850.58$24,638.23$32,148.86$33,289.36FY 2027$165,610.7$24,013.55$27,077.14$35,331.25$36,584.65FY 2028$182,287.9$26,431.75$29,803.84$38,889.16$40,268.77FY 2029$200,974.3$29,141.27$32,859.04$42,875.69$44,396.73^Final EBITA^Author's CalculationsThis more conservative model suggests a fair price of $148.1, indicating an upside of 89.3% from the current stock price of $78.2. Looking ahead to FY2029, the projected stock price is $184.2, translating into annual returns of 22.6%. While not as high as the previous model, these returns are still substantial and attractive.Risks to ThesisThe primary risk factor in this bullish thesis revolves around the influence exerted by the Chinese Government. The government's control over corporations, as evidenced by the halt in the Ant Group's IPO in Hong Kong, poses a considerable risk. If there were a concerted effort to sideline Jack Ma, a key figure in the company's direction, it could deliver a significant intellectual blow to Alibaba. In such a scenario, the company would need to secure an equally capable protector, given Ma's influential role despite not holding the CEO position.Secondly, there exists the risk of a severe Chinese recession impacting Alibaba's sales volume. With over 65% of e-commerce revenues hinging on the Chinese market, the company is vulnerable to economic downturns. This vulnerability extends beyond e-commerce to include entertainment platforms and Cainiao, which is intricately tied to e-commerce operations.Lastly, there is the risk of a foreign competitor, such as Amazon.com, Inc. (AMZN), succeeding in growing aggressively within the Chinese market. Alibaba's lack of logistical infrastructure in the US to counterbalance Amazon's influence could position the company unfavorably in the long term. To mitigate this risk, Alibaba would need to consider strategic expansion into other markets.ConclusionIn conclusion, Alibaba Group Holdings Limited emerges as a compelling investment opportunity marked by a resilient business model and diversified revenue streams. Despite recent challenges and regulatory uncertainties, the company's strategic segments, including e-commerce, cloud, and logistics, showcase robust growth potential domestically and internationally.Throughout two DCF models, we observe that Alibaba's undervaluation could be as high as 161.9% considering analysts' estimates. However, to make it more conservative, I conducted my own estimates which suggest that Alibaba is undervalued by 89.3%. After conducting the two models, I am assigning Alibaba a stock price target of $148.1, which is an 89.3% upside from the current stock price of $78.2. Furthermore, the stock could reach a price of $184.2 in FY 2029 (year 2028), which translates into 22.4% annual returns.The undervaluation indicators, coupled with the recent stock pullback, suggest this is an attractive entry point for Alibaba Group Holding Limited stock, but investors must remain vigilant to risks associated with governmental influence, economic downturns, and foreign competition. Alibaba's adeptness in navigating these challenges, coupled with its financial strength and strategic positioning, positions it favorably for long-term growth.Editor's Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.","news_type":1},"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":244560092061792,"gmtCreate":1700731158919,"gmtModify":1700731162866,"author":{"id":"4097767435236930","authorId":"4097767435236930","name":"Aivern","avatar":"https://static.tigerbbs.com/3827d6c7271c872fcc616eaa9b4f7f54","vip":1,"crmLevel":4,"crmLevelSwitch":1,"idStr":"4097767435236930","authorIdStr":"4097767435236930"},"htmlText":"Hugely? No. Pooh can just decide one day alibaba sounds anti china and close it down. It's fairly priced.","listText":"Hugely? No. Pooh can just decide one day alibaba sounds anti china and close it down. It's fairly priced.","text":"Hugely? No. Pooh can just decide one day alibaba sounds anti china and close it down. It's fairly priced.","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":5,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/244560092061792","repostId":2385466779,"repostType":2,"repost":{"id":"2385466779","pubTimestamp":1700722800,"share":"https://ttm.financial/m/news/2385466779?lang=&edition=fundamental","pubTime":"2023-11-23 15:00","market":"us","language":"en","title":"Alibaba Is Hugely Undervalued?","url":"https://stock-news.laohu8.com/highlight/detail?id=2385466779","media":"Seeking Alpha","summary":"Alibaba Group Holding Limited offers a compelling investment opportunity with a diversified portfolio spanning e-commerce, cloud services, logistics, and digital media, providing resilience in a dynam","content":"<html><head></head><body><ul style=\"\"><li>Alibaba Group Holding Limited offers a compelling investment opportunity with a diversified portfolio spanning e-commerce, cloud services, logistics, and digital media, providing resilience in a dynamic market.</li><li>Despite recent challenges and regulatory uncertainties, Alibaba&#39;s strategic segments, both domestically and internationally, showcase robust growth potential, emphasizing the company&#39;s adaptability and innovation.</li><li>The recent stock pullback, coupled with an undervaluation that could be as high as 161.9%, presents an attractive entry point for investors looking to capitalize on Alibaba&#39;s long-term growth prospects.</li><li>Investors must remain vigilant to potential risks, including governmental influence, economic downturns, and competition from foreign players, acknowledging the nuanced balance between Alibaba&#39;s strengths and external factors.</li><li>Alibaba&#39;s solid financial foundation, diversified revenue streams, and strategic positioning position it favorably for long-term growth, making it a promising investment choice.</li></ul><img src=\"https://static.tigerbbs.com/84b6aeab08dc480ef3a214462aadfcfd\" title=\"Robert Way\" tg-width=\"750\" tg-height=\"500\"/>Robert Way<h2 id=\"id_522885472\">Thesis</h2>After the release of FQ2 2024, Alibaba Group Holding Limited (NYSE:BABA) experienced a 10% decline as the company fell short of revenue expectations by $250 million, despite EPS estimates. Additionally, the company abandoned its plans to spin off its cloud business, citing uncertainties in the growth trajectory caused by the U.S.-imposed restrictions on AI chip imports.Nevertheless, in this article, I will elucidate using two valuation models why Alibaba is significantly undervalued, marking an undervaluation of up to 80%. This substantial undervaluation provides a considerable margin of security for investors, warranting a &#34;strong buy&#34; recommendation. I propose a fair price of $148.1 for the stock.<h2 id=\"id_1987249582\">Overview</h2><img src=\"https://static.tigerbbs.com/081c2dd239fb542c7136a40c1b6c2ad1\" alt=\"FQ2 2024 Alibaba\" title=\"FQ2 2024 Alibaba\" tg-width=\"640\" tg-height=\"133\"/>FQ2 2024 Alibaba<img src=\"https://static.tigerbbs.com/e6bb4b66323db07420db79ea50a4c420\" alt=\"FY 2023\" title=\"FY 2023\" tg-width=\"640\" tg-height=\"417\"/>FY 2023<h3 id=\"id_3914187007\">Q2 2024 Earnings</h3>In FQ2 2024, Alibaba outperformed expectations in earnings but fell short on revenue, with a notable miss of $230 million. Despite this, the company reported an impressive EPS of $2.14, surpassing the consensus by $0.05.The most significant blow to these earnings results came as Alibaba opted to abandon its plan to spin off its cloud business. The rationale behind this decision was a belief that the spin-off would not deliver the anticipated shareholder value. Furthermore, the company pointed to the current export restrictions on AI chips imposed by the U.S., which has cast uncertainty over the prospects of its cloud segment.Adding to the challenges, Alibaba disclosed that Jack Ma&#39;s family trust intends to sell 10 million shares valued at $870.71 million on November 21.<h3 id=\"id_2851468396\">Market</h3><h4 id=\"id_4264278908\">E-Commerce China</h4>Alibaba&#39;s primary focus lies in e-commerce, as illustrated in the table below, with a significant dependency on China, representing 67% of this segment. However, since 2021, Alibaba has successfully reduced its reliance on the Chinese market by 3%.In addition to its Chinese and international e-commerce segments, Alibaba operates in the &#34;wholesale&#34; segment. This facet involves collaboration with Chinese factories, functioning in a producer-to-consumer model. Notably, the cost per unit decreases with higher purchase quantities.Projections indicate an anticipated growth rate of 8.21% for the Chinese e-commerce market throughout 2027. In contrast, the global e-commerce market is expected to experience a more robust growth rate of approximately 15% by 2032.<img src=\"https://static.tigerbbs.com/cb5ffc078e262abf6dae01b3008e5789\" alt=\"Statista\" title=\"Statista\" tg-width=\"640\" tg-height=\"340\"/>Statista<img src=\"https://static.tigerbbs.com/fa869592dad3d103e32094e603a07313\" alt=\"Precedence Research\" title=\"Precedence Research\" tg-width=\"1000\" tg-height=\"592\"/>Precedence Research<h4 id=\"id_21983917\">Local Consumer Services</h4>The Local Consumer Services segment of Alibaba encompasses a range of diverse services designed to cater to various consumer needs. Among these services are Ele.me, a prominent on-demand delivery platform, Amap, providing digital mapping services along with real-time traffic information, Fliggy, an online travel platform, and Taoxianda, a platform aiding retailers in establishing and managing online stores.<h4 id=\"id_2699114686\">Cainiao - Platform Delivery China</h4>Cainiao, a company 70% owned by Alibaba following its acquisition of the majority stake in 2017, specializes in logistics. Serving as a crucial complement to Alibaba&#39;s e-commerce operations in China, Cainiao plays a pivotal role in ensuring timely deliveries within China, often achieving the impressive feat of completing deliveries in less than 24 hours.Notably, the platform delivery segment has experienced recent growth, propelled by the surge in e-commerce sales. Projections indicate a continued growth rate of 5.15% for this market throughout 2027.<img src=\"https://static.tigerbbs.com/bd03ba9b4a58c40599efe510d0bd95e0\" alt=\"Author&#39;s Calculations with base on Statista\" title=\"Author&#39;s Calculations with base on Statista\" tg-width=\"640\" tg-height=\"385\"/>Author&#39;s Calculations with base on Statista<h4 id=\"id_2806472205\">Cloud - China</h4>Alibaba also boasts a formidable presence in the cloud segment, initially slated for a significant spinoff as part of a major strategic plan. This move garnered widespread acclaim from investors, given the robust prospects of the cloud market in China. Projections estimate a noteworthy growth rate of 20.44%, and the autonomy of an independent Alibaba Cloud company is anticipated to drive rapid revenue expansion and robust cash-flow growth, particularly considering the high profitability associated with cloud services.Notably, the projected growth rate of 20.44% for the Chinese cloud market closely aligns with the impressive revenue growth that Alibaba has consistently demonstrated within its cloud segment.<img src=\"https://static.tigerbbs.com/2c83a9ff7534361801c44c57f6842844\" alt=\"Author&#39;s Calculations with base on Statista\" title=\"Author&#39;s Calculations with base on Statista\" tg-width=\"640\" tg-height=\"385\"/>Author&#39;s Calculations with base on Statista<h4 id=\"id_1524553402\">Digital Media &amp; Entertainment - China</h4>The final segment in Alibaba&#39;s diverse portfolio is Digital Media and Entertainment, featuring key components such as Youku, a prominent video platform, and Alibaba Pictures, which encompasses intellectual property, licensing, and cinema ticketing management for the movie industry. Additionally, the company provides other content platforms and engages in the online gaming sector.Projections for the digital media market in China are optimistic, with an expected growth rate of 10.88%. This growth is anticipated to be fueled by the increasing revenue per user, projected to experience a substantial uptick of 7.6% from 2023 to 2027.<img src=\"https://static.tigerbbs.com/68b6148617c06e49a88276236a24288e\" alt=\"Statista\" title=\"Statista\" tg-width=\"640\" tg-height=\"402\"/>Statista<img src=\"https://static.tigerbbs.com/d15ed857ad6619ed880668554372e704\" alt=\"Statista\" title=\"Statista\" tg-width=\"640\" tg-height=\"378\"/>Statista<h2 id=\"id_3984174781\">Financial</h2>Alibaba has demonstrated remarkable revenue growth over the past six years. Since FY2018, the company has achieved an annual revenue growth rate of 35.68%. However, in a recent development, Alibaba experienced its first decline in revenue, with a year-over-year reduction of 5.97%.What stands out is the company&#39;s ability to consistently grow its net income, a crucial factor influencing a discounted cash flow (&#34;DCF&#34;) model. The net income has grown at a commendable annual rate of 15.57%, currently standing at $18.16 billion, though below the 2021 all-time high of $22.98 billion.In terms of margins, a noticeable downward trend is observed in both operating margin and net income margin. In FY2018, these metrics were above 25%, with the operating margin at 28.21% and the net income margin at 25.61%. As of the latest earnings release, both metrics have decreased to 14.66% and 14.50%, respectively.<img src=\"https://static.tigerbbs.com/960c6966b32c3d6338927f89928133eb\" alt=\"Author&#39;s Calculations\" title=\"Author&#39;s Calculations\" tg-width=\"640\" tg-height=\"384\"/>Author&#39;s Calculations<img src=\"https://static.tigerbbs.com/c879d4d20ebba8a4b090bf207e7fdaa6\" alt=\"Author&#39;s Calculations\" title=\"Author&#39;s Calculations\" tg-width=\"640\" tg-height=\"389\"/>Author&#39;s CalculationsAlibaba&#39;s financial foundation appears robust, with a substantial cash reserve of $78.66 billion and a comparatively low debt burden. Long-term debt stands at $21.71 billion, while short-term debt is at $5.4 billion.<img src=\"https://static.tigerbbs.com/29d34db56f2ac763355ca3f8ce4693ef\" alt=\"Author&#39;s Calculations\" title=\"Author&#39;s Calculations\" tg-width=\"640\" tg-height=\"391\"/>Author&#39;s CalculationsDespite the overall positive financial outlook, Alibaba&#39;s free cash flow has experienced annual growth of 9.38%. The free cash flow margin, however, has seen a significant decrease from FY2018&#39;s 36.6% to the current level of 18.2%. This indicates a potential decrease in efficiency, and Alibaba attributes this shift to the presence of project-based contracts, which inherently have lower margins. The company is actively working to reduce the impact of these contracts to enhance overall margins.<img src=\"https://static.tigerbbs.com/bd64025d13a547be8d4e59fe5383e405\" alt=\"Author&#39;s Calculations\" title=\"Author&#39;s Calculations\" tg-width=\"640\" tg-height=\"461\"/>Author&#39;s Calculations<img src=\"https://static.tigerbbs.com/b5ab121ecbf172e600e9baf213607a57\" alt=\"Author&#39;s Calculations\" title=\"Author&#39;s Calculations\" tg-width=\"640\" tg-height=\"476\"/>Author&#39;s Calculations<img src=\"https://static.tigerbbs.com/1e791c46f8ca163f7aa30e11f9d6c939\" alt=\"Author&#39;s Calculations\" title=\"Author&#39;s Calculations\" tg-width=\"640\" tg-height=\"358\"/>Author&#39;s Calculations<h2 id=\"id_3734509088\">Valuation</h2>In this valuation of Alibaba, I will employ two distinct models: the first relies on analysts&#39; estimates for revenue and net income, while the second model involves my own estimates formulated from scratch. These estimates are based on the anticipated growth rates within the markets of each of Alibaba&#39;s operating segments.The table below outlines the assumptions integral to calculating Alibaba&#39;s fair stock price. Notably, D&amp;A, interest expenses, and CapEx will be computed using margins tied to revenue.Ultimately, the WACC will be derived from variables such as equity value, debt value, and the cost of debt, utilizing the widely recognized formula.For FY2023 and FY2024, analysts anticipate revenues of $133.3 billion and $145.93 billion, respectively. Subsequently, for FY2026-2029, I will apply an expected forward revenue growth rate of 4.87%.<table style=\"border-collapse:collapse;\"><colgroup><col/><col/></colgroup><tbody><tr><td colspan=\"2\" style=\"text-align:left;\">TABLE OF ASSUMPTIONS</td></tr><tr><td style=\"text-align:left;\">(Current data)</td><td style=\"text-align:left;\"></td></tr><tr><td style=\"text-align:left;\">Assumptions Part 1</td><td style=\"text-align:left;\"></td></tr><tr><td style=\"text-align:left;\"></td><td style=\"text-align:left;\"></td></tr><tr><td style=\"text-align:left;\">Equity Value</td><td style=\"text-align:left;\">141,772.60</td></tr><tr><td style=\"text-align:left;\">Debt Value</td><td style=\"text-align:left;\">27,182.30</td></tr><tr><td style=\"text-align:left;\">Cost of Debt</td><td style=\"text-align:left;\">3.49%</td></tr><tr><td style=\"text-align:left;\">Tax Rate</td><td style=\"text-align:left;\">12.76%</td></tr><tr><td style=\"text-align:left;\">10y Treasury</td><td style=\"text-align:left;\">4.80%</td></tr><tr><td style=\"text-align:left;\">Beta</td><td style=\"text-align:left;\">0.89</td></tr><tr><td style=\"text-align:left;\">Market Return</td><td style=\"text-align:left;\">10.50%</td></tr><tr><td style=\"text-align:left;\">Cost of Equity</td><td style=\"text-align:left;\">9.87%</td></tr><tr><td style=\"text-align:left;\">Assumptions Part 2</td><td style=\"text-align:left;\"></td></tr><tr><td style=\"text-align:left;\">CapEx</td><td style=\"text-align:left;\">4,702.10</td></tr><tr><td style=\"text-align:left;\">Capex Margin</td><td style=\"text-align:left;\">3.75%</td></tr><tr><td style=\"text-align:left;\">Net Income</td><td style=\"text-align:left;\">18,168.20</td></tr><tr><td style=\"text-align:left;\">Interest</td><td style=\"text-align:left;\">948.40</td></tr><tr><td style=\"text-align:left;\">Tax</td><td style=\"text-align:left;\">2,656.80</td></tr><tr><td style=\"text-align:left;\">D&amp;A</td><td style=\"text-align:left;\">6,245.60</td></tr><tr><td style=\"text-align:left;\">Ebitda</td><td style=\"text-align:left;\">28,019.00</td></tr><tr><td style=\"text-align:left;\"></td><td style=\"text-align:left;\"></td></tr><tr><td style=\"text-align:left;\">D&amp;A Margin</td><td style=\"text-align:left;\">4.98%</td></tr><tr><td style=\"text-align:left;\">Interest Expense Margin</td><td style=\"text-align:left;\">0.76%</td></tr><tr><td style=\"text-align:left;\">Revenue</td><td style=\"text-align:left;\">125,311.9</td></tr></tbody></table><h3 id=\"id_56021089\">Analysts&#39; Estimates</h3>For FY2023 and FY2024, analysts are anticipating revenues of $133.3 billion and $145.93 billion, respectively. Looking ahead to FY2026-2029, a forward revenue growth rate of 4.87% will be applied.In terms of net income, analysts project an EPS of $8.92, translating to a net income of $22.63 billion for FY2024. For FY2025, the estimate increases to an EPS of $9.75, corresponding to a net income of $24.74 billion. Subsequently, for FY2026-2029, the anticipated 3-5 year long-term expected EPS growth rate of 17.45% will be applied.<table style=\"border-collapse:collapse;\"><colgroup><col/><col/><col/><col/><col/><col/></colgroup><tbody><tr><td style=\"text-align:left;\"></td><td style=\"text-align:left;\">Revenue</td><td style=\"text-align:left;\">Net Income</td><td style=\"text-align:left;\">Plus Taxes</td><td style=\"text-align:left;\">Plus D&amp;A</td><td style=\"text-align:left;\">Plus Interest</td></tr><tr><td style=\"text-align:left;\">2023</td><td style=\"text-align:left;\">$133,310.0</td><td style=\"text-align:left;\">$22,634.50</td><td style=\"text-align:left;\">$25,522.15</td><td style=\"text-align:left;\">$32,104.47</td><td style=\"text-align:left;\">$33,104.00</td></tr><tr><td style=\"text-align:left;\">2024</td><td style=\"text-align:left;\">$145,930.0</td><td style=\"text-align:left;\">$24,740.63</td><td style=\"text-align:left;\">$27,896.97</td><td style=\"text-align:left;\">$34,479.29</td><td style=\"text-align:left;\">$35,478.82</td></tr><tr><td style=\"text-align:left;\">2025</td><td style=\"text-align:left;\">$152,715.7</td><td style=\"text-align:left;\">$29,057.86</td><td style=\"text-align:left;\">$32,764.99</td><td style=\"text-align:left;\">$40,305.48</td><td style=\"text-align:left;\">$41,450.52</td></tr><tr><td style=\"text-align:left;\">2026</td><td style=\"text-align:left;\">$159,817.0</td><td style=\"text-align:left;\">$34,128.46</td><td style=\"text-align:left;\">$38,482.48</td><td style=\"text-align:left;\">$46,373.61</td><td style=\"text-align:left;\">$47,571.88</td></tr><tr><td style=\"text-align:left;\">2027</td><td style=\"text-align:left;\">$167,248.5</td><td style=\"text-align:left;\">$40,083.88</td><td style=\"text-align:left;\">$45,197.68</td><td style=\"text-align:left;\">$53,455.74</td><td style=\"text-align:left;\">$54,709.73</td></tr><tr><td style=\"text-align:left;\">2028</td><td style=\"text-align:left;\">$175,025.6</td><td style=\"text-align:left;\">$47,078.51</td><td style=\"text-align:left;\">$53,084.67</td><td style=\"text-align:left;\">$61,726.73</td><td style=\"text-align:left;\">$63,039.04</td></tr><tr><td style=\"text-align:left;\"></td><td style=\"text-align:left;\"></td><td style=\"text-align:left;\"></td><td style=\"text-align:left;\"></td><td style=\"text-align:left;\"></td><td style=\"text-align:left;\">^Final EBITA^</td></tr></tbody></table><img src=\"https://static.tigerbbs.com/90a2b3d81905562e6d4cd4d6443240d7\" alt=\"Author&#39;s Calculations\" title=\"Author&#39;s Calculations\" tg-width=\"640\" tg-height=\"679\"/>Author&#39;s CalculationsThe initial model suggests that Alibaba is undervalued by a significant margin, approximately 161.9%. According to this model, the fair stock price is estimated to be $204.9, closely aligning with the stock price on July 9, 2021, when the stock traded at $205.94, a period within the onset of the bear market.Additionally, the model indicates a projected future stock price of $274.7. This implies a potential gain of 41.9% until 2028, aligning with Alibaba&#39;s FY2029.<img src=\"https://static.tigerbbs.com/0901371041fe275255a832be806605b0\" alt=\"Seeking Alpha\" title=\"Seeking Alpha\" tg-width=\"640\" tg-height=\"344\"/>Seeking Alpha<h3 id=\"id_3561401362\">My Estimates</h3>In this alternative model, I have projected the growth of each of Alibaba&#39;s segments based on the expected CAGR in their respective markets. The Chinese Retail &amp; Wholesale segments are forecasted to grow at a CAGR of 8.21%, International Retail &amp; Wholesale at 15%, Cainiao in the Platform Delivery market at 5.15%, Chinese cloud at 20.44%, and Chinese Digital Media &amp; Entertainment at a rate of 10.88%. For Local Consumer Services, where estimating revenues is challenging, a conservative growth rate of 5% has been applied, which is notably below the current YoY growth of 16% for this segment.<img src=\"https://static.tigerbbs.com/a0aba12ef54f1700a42b67ae82e18682\" alt=\"Author&#39;s Calculations\" title=\"Author&#39;s Calculations\" tg-width=\"640\" tg-height=\"98\"/>Author&#39;s Calculations<table style=\"border-collapse:collapse;\"><colgroup><col/><col/><col/><col/><col/><col/></colgroup><tbody><tr><td style=\"text-align:left;\"></td><td style=\"text-align:left;\">Revenue</td><td style=\"text-align:left;\">Net Income</td><td style=\"text-align:left;\">Plus Taxes</td><td style=\"text-align:left;\">Plus D&amp;A</td><td style=\"text-align:left;\">Plus Interest</td></tr><tr><td style=\"text-align:left;\">FY 2024</td><td style=\"text-align:left;\">$125,311.9</td><td style=\"text-align:left;\">$18,170.23</td><td style=\"text-align:left;\">$20,488.34</td><td style=\"text-align:left;\">$26,733.94</td><td style=\"text-align:left;\">$27,682.34</td></tr><tr><td style=\"text-align:left;\">FY 2025</td><td style=\"text-align:left;\">$137,322.4</td><td style=\"text-align:left;\">$19,911.75</td><td style=\"text-align:left;\">$22,452.04</td><td style=\"text-align:left;\">$28,697.64</td><td style=\"text-align:left;\">$29,646.04</td></tr><tr><td style=\"text-align:left;\">FY 2026</td><td style=\"text-align:left;\">$150,693.7</td><td style=\"text-align:left;\">$21,850.58</td><td style=\"text-align:left;\">$24,638.23</td><td style=\"text-align:left;\">$32,148.86</td><td style=\"text-align:left;\">$33,289.36</td></tr><tr><td style=\"text-align:left;\">FY 2027</td><td style=\"text-align:left;\">$165,610.7</td><td style=\"text-align:left;\">$24,013.55</td><td style=\"text-align:left;\">$27,077.14</td><td style=\"text-align:left;\">$35,331.25</td><td style=\"text-align:left;\">$36,584.65</td></tr><tr><td style=\"text-align:left;\">FY 2028</td><td style=\"text-align:left;\">$182,287.9</td><td style=\"text-align:left;\">$26,431.75</td><td style=\"text-align:left;\">$29,803.84</td><td style=\"text-align:left;\">$38,889.16</td><td style=\"text-align:left;\">$40,268.77</td></tr><tr><td style=\"text-align:left;\">FY 2029</td><td style=\"text-align:left;\">$200,974.3</td><td style=\"text-align:left;\">$29,141.27</td><td style=\"text-align:left;\">$32,859.04</td><td style=\"text-align:left;\">$42,875.69</td><td style=\"text-align:left;\">$44,396.73</td></tr><tr><td style=\"text-align:left;\"></td><td style=\"text-align:left;\"></td><td style=\"text-align:left;\"></td><td style=\"text-align:left;\"></td><td style=\"text-align:left;\"></td><td style=\"text-align:left;\">^Final EBITA^</td></tr></tbody></table>Author&#39;s CalculationsThis more conservative model suggests a fair price of $148.1, indicating an upside of 89.3% from the current stock price of $78.2. Looking ahead to FY2029, the projected stock price is $184.2, translating into annual returns of 22.6%. While not as high as the previous model, these returns are still substantial and attractive.<h2 id=\"id_3686040600\">Risks to Thesis</h2>The primary risk factor in this bullish thesis revolves around the influence exerted by the Chinese Government. The government&#39;s control over corporations, as evidenced by the halt in the Ant Group&#39;s IPO in Hong Kong, poses a considerable risk. If there were a concerted effort to sideline Jack Ma, a key figure in the company&#39;s direction, it could deliver a significant intellectual blow to Alibaba. In such a scenario, the company would need to secure an equally capable protector, given Ma&#39;s influential role despite not holding the CEO position.Secondly, there exists the risk of a severe Chinese recession impacting Alibaba&#39;s sales volume. With over 65% of e-commerce revenues hinging on the Chinese market, the company is vulnerable to economic downturns. This vulnerability extends beyond e-commerce to include entertainment platforms and Cainiao, which is intricately tied to e-commerce operations.Lastly, there is the risk of a foreign competitor, such as Amazon.com, Inc. (AMZN), succeeding in growing aggressively within the Chinese market. Alibaba&#39;s lack of logistical infrastructure in the US to counterbalance Amazon&#39;s influence could position the company unfavorably in the long term. To mitigate this risk, Alibaba would need to consider strategic expansion into other markets.<h2 id=\"id_2850560331\">Conclusion</h2>In conclusion, Alibaba Group Holdings Limited emerges as a compelling investment opportunity marked by a resilient business model and diversified revenue streams. Despite recent challenges and regulatory uncertainties, the company&#39;s strategic segments, including e-commerce, cloud, and logistics, showcase robust growth potential domestically and internationally.Throughout two DCF models, we observe that Alibaba&#39;s undervaluation could be as high as 161.9% considering analysts&#39; estimates. However, to make it more conservative, I conducted my own estimates which suggest that Alibaba is undervalued by 89.3%. After conducting the two models, I am assigning Alibaba a stock price target of $148.1, which is an 89.3% upside from the current stock price of $78.2. Furthermore, the stock could reach a price of $184.2 in FY 2029 (year 2028), which translates into 22.4% annual returns.The undervaluation indicators, coupled with the recent stock pullback, suggest this is an attractive entry point for Alibaba Group Holding Limited stock, but investors must remain vigilant to risks associated with governmental influence, economic downturns, and foreign competition. Alibaba&#39;s adeptness in navigating these challenges, coupled with its financial strength and strategic positioning, positions it favorably for long-term growth.Editor&#39;s Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.</body></html>","source":"seekingalpha","collect":0,"html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Alibaba Is Hugely Undervalued?</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nAlibaba Is Hugely Undervalued?\n</h2>\n\n<h4 class=\"meta\">\n\n\n2023-11-23 15:00 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4653737-alibaba-is-hugely-undervalued>Seeking Alpha</a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\nAlibaba Group Holding Limited offers a compelling investment opportunity with a diversified portfolio spanning e-commerce, cloud services, logistics, and digital media, providing resilience in a ...\n\n<a href=\"https://seekingalpha.com/article/4653737-alibaba-is-hugely-undervalued\">Web Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","type":0,"thumbnail":"","relate_stocks":{"LU0053666078.USD":"摩根大通基金-美国股票A（离岸）美元","IE00B19Z9505.USD":"美盛-美国大盘成长股A Acc","LU0079474960.USD":"联博美国增长基金A","BK4559":"巴菲特持仓","BK4538":"云计算","LU0082616367.USD":"摩根大通美国科技A（dist）","GB00BDT5M118.USD":"天利环球扩展Alpha基金A Acc","09988":"阿里巴巴-W","IE0004445239.USD":"JANUS HENDERSON US FORTY \"A2\" (USD) ACC","BK4550":"红杉资本持仓","LU0061474960.USD":"天利环球焦点基金AU Acc","LU0353189680.USD":"富国美国全盘成长基金Cl A Acc","BK4122":"互联网与直销零售","LU0072913022.USD":"UBS (LUX) EQUITY FUND - 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Additionally, the company abandoned its plans to spin off its cloud business, citing uncertainties in the growth trajectory caused by the U.S.-imposed restrictions on AI chip imports.Nevertheless, in this article, I will elucidate using two valuation models why Alibaba is significantly undervalued, marking an undervaluation of up to 80%. This substantial undervaluation provides a considerable margin of security for investors, warranting a \"strong buy\" recommendation. I propose a fair price of $148.1 for the stock.OverviewFQ2 2024 AlibabaFY 2023Q2 2024 EarningsIn FQ2 2024, Alibaba outperformed expectations in earnings but fell short on revenue, with a notable miss of $230 million. Despite this, the company reported an impressive EPS of $2.14, surpassing the consensus by $0.05.The most significant blow to these earnings results came as Alibaba opted to abandon its plan to spin off its cloud business. The rationale behind this decision was a belief that the spin-off would not deliver the anticipated shareholder value. Furthermore, the company pointed to the current export restrictions on AI chips imposed by the U.S., which has cast uncertainty over the prospects of its cloud segment.Adding to the challenges, Alibaba disclosed that Jack Ma's family trust intends to sell 10 million shares valued at $870.71 million on November 21.MarketE-Commerce ChinaAlibaba's primary focus lies in e-commerce, as illustrated in the table below, with a significant dependency on China, representing 67% of this segment. However, since 2021, Alibaba has successfully reduced its reliance on the Chinese market by 3%.In addition to its Chinese and international e-commerce segments, Alibaba operates in the \"wholesale\" segment. This facet involves collaboration with Chinese factories, functioning in a producer-to-consumer model. Notably, the cost per unit decreases with higher purchase quantities.Projections indicate an anticipated growth rate of 8.21% for the Chinese e-commerce market throughout 2027. In contrast, the global e-commerce market is expected to experience a more robust growth rate of approximately 15% by 2032.StatistaPrecedence ResearchLocal Consumer ServicesThe Local Consumer Services segment of Alibaba encompasses a range of diverse services designed to cater to various consumer needs. Among these services are Ele.me, a prominent on-demand delivery platform, Amap, providing digital mapping services along with real-time traffic information, Fliggy, an online travel platform, and Taoxianda, a platform aiding retailers in establishing and managing online stores.Cainiao - Platform Delivery ChinaCainiao, a company 70% owned by Alibaba following its acquisition of the majority stake in 2017, specializes in logistics. Serving as a crucial complement to Alibaba's e-commerce operations in China, Cainiao plays a pivotal role in ensuring timely deliveries within China, often achieving the impressive feat of completing deliveries in less than 24 hours.Notably, the platform delivery segment has experienced recent growth, propelled by the surge in e-commerce sales. Projections indicate a continued growth rate of 5.15% for this market throughout 2027.Author's Calculations with base on StatistaCloud - ChinaAlibaba also boasts a formidable presence in the cloud segment, initially slated for a significant spinoff as part of a major strategic plan. This move garnered widespread acclaim from investors, given the robust prospects of the cloud market in China. Projections estimate a noteworthy growth rate of 20.44%, and the autonomy of an independent Alibaba Cloud company is anticipated to drive rapid revenue expansion and robust cash-flow growth, particularly considering the high profitability associated with cloud services.Notably, the projected growth rate of 20.44% for the Chinese cloud market closely aligns with the impressive revenue growth that Alibaba has consistently demonstrated within its cloud segment.Author's Calculations with base on StatistaDigital Media & Entertainment - ChinaThe final segment in Alibaba's diverse portfolio is Digital Media and Entertainment, featuring key components such as Youku, a prominent video platform, and Alibaba Pictures, which encompasses intellectual property, licensing, and cinema ticketing management for the movie industry. Additionally, the company provides other content platforms and engages in the online gaming sector.Projections for the digital media market in China are optimistic, with an expected growth rate of 10.88%. This growth is anticipated to be fueled by the increasing revenue per user, projected to experience a substantial uptick of 7.6% from 2023 to 2027.StatistaStatistaFinancialAlibaba has demonstrated remarkable revenue growth over the past six years. Since FY2018, the company has achieved an annual revenue growth rate of 35.68%. However, in a recent development, Alibaba experienced its first decline in revenue, with a year-over-year reduction of 5.97%.What stands out is the company's ability to consistently grow its net income, a crucial factor influencing a discounted cash flow (\"DCF\") model. The net income has grown at a commendable annual rate of 15.57%, currently standing at $18.16 billion, though below the 2021 all-time high of $22.98 billion.In terms of margins, a noticeable downward trend is observed in both operating margin and net income margin. In FY2018, these metrics were above 25%, with the operating margin at 28.21% and the net income margin at 25.61%. As of the latest earnings release, both metrics have decreased to 14.66% and 14.50%, respectively.Author's CalculationsAuthor's CalculationsAlibaba's financial foundation appears robust, with a substantial cash reserve of $78.66 billion and a comparatively low debt burden. Long-term debt stands at $21.71 billion, while short-term debt is at $5.4 billion.Author's CalculationsDespite the overall positive financial outlook, Alibaba's free cash flow has experienced annual growth of 9.38%. The free cash flow margin, however, has seen a significant decrease from FY2018's 36.6% to the current level of 18.2%. This indicates a potential decrease in efficiency, and Alibaba attributes this shift to the presence of project-based contracts, which inherently have lower margins. The company is actively working to reduce the impact of these contracts to enhance overall margins.Author's CalculationsAuthor's CalculationsAuthor's CalculationsValuationIn this valuation of Alibaba, I will employ two distinct models: the first relies on analysts' estimates for revenue and net income, while the second model involves my own estimates formulated from scratch. These estimates are based on the anticipated growth rates within the markets of each of Alibaba's operating segments.The table below outlines the assumptions integral to calculating Alibaba's fair stock price. Notably, D&A, interest expenses, and CapEx will be computed using margins tied to revenue.Ultimately, the WACC will be derived from variables such as equity value, debt value, and the cost of debt, utilizing the widely recognized formula.For FY2023 and FY2024, analysts anticipate revenues of $133.3 billion and $145.93 billion, respectively. Subsequently, for FY2026-2029, I will apply an expected forward revenue growth rate of 4.87%.TABLE OF ASSUMPTIONS(Current data)Assumptions Part 1Equity Value141,772.60Debt Value27,182.30Cost of Debt3.49%Tax Rate12.76%10y Treasury4.80%Beta0.89Market Return10.50%Cost of Equity9.87%Assumptions Part 2CapEx4,702.10Capex Margin3.75%Net Income18,168.20Interest948.40Tax2,656.80D&A6,245.60Ebitda28,019.00D&A Margin4.98%Interest Expense Margin0.76%Revenue125,311.9Analysts' EstimatesFor FY2023 and FY2024, analysts are anticipating revenues of $133.3 billion and $145.93 billion, respectively. Looking ahead to FY2026-2029, a forward revenue growth rate of 4.87% will be applied.In terms of net income, analysts project an EPS of $8.92, translating to a net income of $22.63 billion for FY2024. For FY2025, the estimate increases to an EPS of $9.75, corresponding to a net income of $24.74 billion. Subsequently, for FY2026-2029, the anticipated 3-5 year long-term expected EPS growth rate of 17.45% will be applied.RevenueNet IncomePlus TaxesPlus D&APlus Interest2023$133,310.0$22,634.50$25,522.15$32,104.47$33,104.002024$145,930.0$24,740.63$27,896.97$34,479.29$35,478.822025$152,715.7$29,057.86$32,764.99$40,305.48$41,450.522026$159,817.0$34,128.46$38,482.48$46,373.61$47,571.882027$167,248.5$40,083.88$45,197.68$53,455.74$54,709.732028$175,025.6$47,078.51$53,084.67$61,726.73$63,039.04^Final EBITA^Author's CalculationsThe initial model suggests that Alibaba is undervalued by a significant margin, approximately 161.9%. According to this model, the fair stock price is estimated to be $204.9, closely aligning with the stock price on July 9, 2021, when the stock traded at $205.94, a period within the onset of the bear market.Additionally, the model indicates a projected future stock price of $274.7. This implies a potential gain of 41.9% until 2028, aligning with Alibaba's FY2029.Seeking AlphaMy EstimatesIn this alternative model, I have projected the growth of each of Alibaba's segments based on the expected CAGR in their respective markets. The Chinese Retail & Wholesale segments are forecasted to grow at a CAGR of 8.21%, International Retail & Wholesale at 15%, Cainiao in the Platform Delivery market at 5.15%, Chinese cloud at 20.44%, and Chinese Digital Media & Entertainment at a rate of 10.88%. For Local Consumer Services, where estimating revenues is challenging, a conservative growth rate of 5% has been applied, which is notably below the current YoY growth of 16% for this segment.Author's CalculationsRevenueNet IncomePlus TaxesPlus D&APlus InterestFY 2024$125,311.9$18,170.23$20,488.34$26,733.94$27,682.34FY 2025$137,322.4$19,911.75$22,452.04$28,697.64$29,646.04FY 2026$150,693.7$21,850.58$24,638.23$32,148.86$33,289.36FY 2027$165,610.7$24,013.55$27,077.14$35,331.25$36,584.65FY 2028$182,287.9$26,431.75$29,803.84$38,889.16$40,268.77FY 2029$200,974.3$29,141.27$32,859.04$42,875.69$44,396.73^Final EBITA^Author's CalculationsThis more conservative model suggests a fair price of $148.1, indicating an upside of 89.3% from the current stock price of $78.2. Looking ahead to FY2029, the projected stock price is $184.2, translating into annual returns of 22.6%. While not as high as the previous model, these returns are still substantial and attractive.Risks to ThesisThe primary risk factor in this bullish thesis revolves around the influence exerted by the Chinese Government. The government's control over corporations, as evidenced by the halt in the Ant Group's IPO in Hong Kong, poses a considerable risk. If there were a concerted effort to sideline Jack Ma, a key figure in the company's direction, it could deliver a significant intellectual blow to Alibaba. In such a scenario, the company would need to secure an equally capable protector, given Ma's influential role despite not holding the CEO position.Secondly, there exists the risk of a severe Chinese recession impacting Alibaba's sales volume. With over 65% of e-commerce revenues hinging on the Chinese market, the company is vulnerable to economic downturns. This vulnerability extends beyond e-commerce to include entertainment platforms and Cainiao, which is intricately tied to e-commerce operations.Lastly, there is the risk of a foreign competitor, such as Amazon.com, Inc. (AMZN), succeeding in growing aggressively within the Chinese market. Alibaba's lack of logistical infrastructure in the US to counterbalance Amazon's influence could position the company unfavorably in the long term. To mitigate this risk, Alibaba would need to consider strategic expansion into other markets.ConclusionIn conclusion, Alibaba Group Holdings Limited emerges as a compelling investment opportunity marked by a resilient business model and diversified revenue streams. Despite recent challenges and regulatory uncertainties, the company's strategic segments, including e-commerce, cloud, and logistics, showcase robust growth potential domestically and internationally.Throughout two DCF models, we observe that Alibaba's undervaluation could be as high as 161.9% considering analysts' estimates. However, to make it more conservative, I conducted my own estimates which suggest that Alibaba is undervalued by 89.3%. After conducting the two models, I am assigning Alibaba a stock price target of $148.1, which is an 89.3% upside from the current stock price of $78.2. Furthermore, the stock could reach a price of $184.2 in FY 2029 (year 2028), which translates into 22.4% annual returns.The undervaluation indicators, coupled with the recent stock pullback, suggest this is an attractive entry point for Alibaba Group Holding Limited stock, but investors must remain vigilant to risks associated with governmental influence, economic downturns, and foreign competition. Alibaba's adeptness in navigating these challenges, coupled with its financial strength and strategic positioning, positions it favorably for long-term growth.Editor's Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.","news_type":1},"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":244533538435288,"gmtCreate":1700724483407,"gmtModify":1700726177500,"author":{"id":"4163657155511042","authorId":"4163657155511042","name":"Arbunsah","avatar":"https://community-static.tradeup.com/news/default-avatar.jpg","vip":1,"crmLevel":1,"crmLevelSwitch":0,"idStr":"4163657155511042","authorIdStr":"4163657155511042"},"htmlText":"Good","listText":"Good","text":"Good","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":4,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/244533538435288","repostId":2385466779,"repostType":2,"repost":{"id":"2385466779","pubTimestamp":1700722800,"share":"https://ttm.financial/m/news/2385466779?lang=&edition=fundamental","pubTime":"2023-11-23 15:00","market":"us","language":"en","title":"Alibaba Is Hugely Undervalued?","url":"https://stock-news.laohu8.com/highlight/detail?id=2385466779","media":"Seeking Alpha","summary":"Alibaba Group Holding Limited offers a compelling investment opportunity with a diversified portfolio spanning e-commerce, cloud services, logistics, and digital media, providing resilience in a dynam","content":"<html><head></head><body><ul style=\"\"><li>Alibaba Group Holding Limited offers a compelling investment opportunity with a diversified portfolio spanning e-commerce, cloud services, logistics, and digital media, providing resilience in a dynamic market.</li><li>Despite recent challenges and regulatory uncertainties, Alibaba&#39;s strategic segments, both domestically and internationally, showcase robust growth potential, emphasizing the company&#39;s adaptability and innovation.</li><li>The recent stock pullback, coupled with an undervaluation that could be as high as 161.9%, presents an attractive entry point for investors looking to capitalize on Alibaba&#39;s long-term growth prospects.</li><li>Investors must remain vigilant to potential risks, including governmental influence, economic downturns, and competition from foreign players, acknowledging the nuanced balance between Alibaba&#39;s strengths and external factors.</li><li>Alibaba&#39;s solid financial foundation, diversified revenue streams, and strategic positioning position it favorably for long-term growth, making it a promising investment choice.</li></ul><img src=\"https://static.tigerbbs.com/84b6aeab08dc480ef3a214462aadfcfd\" title=\"Robert Way\" tg-width=\"750\" tg-height=\"500\"/>Robert Way<h2 id=\"id_522885472\">Thesis</h2>After the release of FQ2 2024, Alibaba Group Holding Limited (NYSE:BABA) experienced a 10% decline as the company fell short of revenue expectations by $250 million, despite EPS estimates. Additionally, the company abandoned its plans to spin off its cloud business, citing uncertainties in the growth trajectory caused by the U.S.-imposed restrictions on AI chip imports.Nevertheless, in this article, I will elucidate using two valuation models why Alibaba is significantly undervalued, marking an undervaluation of up to 80%. This substantial undervaluation provides a considerable margin of security for investors, warranting a &#34;strong buy&#34; recommendation. I propose a fair price of $148.1 for the stock.<h2 id=\"id_1987249582\">Overview</h2><img src=\"https://static.tigerbbs.com/081c2dd239fb542c7136a40c1b6c2ad1\" alt=\"FQ2 2024 Alibaba\" title=\"FQ2 2024 Alibaba\" tg-width=\"640\" tg-height=\"133\"/>FQ2 2024 Alibaba<img src=\"https://static.tigerbbs.com/e6bb4b66323db07420db79ea50a4c420\" alt=\"FY 2023\" title=\"FY 2023\" tg-width=\"640\" tg-height=\"417\"/>FY 2023<h3 id=\"id_3914187007\">Q2 2024 Earnings</h3>In FQ2 2024, Alibaba outperformed expectations in earnings but fell short on revenue, with a notable miss of $230 million. Despite this, the company reported an impressive EPS of $2.14, surpassing the consensus by $0.05.The most significant blow to these earnings results came as Alibaba opted to abandon its plan to spin off its cloud business. The rationale behind this decision was a belief that the spin-off would not deliver the anticipated shareholder value. Furthermore, the company pointed to the current export restrictions on AI chips imposed by the U.S., which has cast uncertainty over the prospects of its cloud segment.Adding to the challenges, Alibaba disclosed that Jack Ma&#39;s family trust intends to sell 10 million shares valued at $870.71 million on November 21.<h3 id=\"id_2851468396\">Market</h3><h4 id=\"id_4264278908\">E-Commerce China</h4>Alibaba&#39;s primary focus lies in e-commerce, as illustrated in the table below, with a significant dependency on China, representing 67% of this segment. However, since 2021, Alibaba has successfully reduced its reliance on the Chinese market by 3%.In addition to its Chinese and international e-commerce segments, Alibaba operates in the &#34;wholesale&#34; segment. This facet involves collaboration with Chinese factories, functioning in a producer-to-consumer model. Notably, the cost per unit decreases with higher purchase quantities.Projections indicate an anticipated growth rate of 8.21% for the Chinese e-commerce market throughout 2027. In contrast, the global e-commerce market is expected to experience a more robust growth rate of approximately 15% by 2032.<img src=\"https://static.tigerbbs.com/cb5ffc078e262abf6dae01b3008e5789\" alt=\"Statista\" title=\"Statista\" tg-width=\"640\" tg-height=\"340\"/>Statista<img src=\"https://static.tigerbbs.com/fa869592dad3d103e32094e603a07313\" alt=\"Precedence Research\" title=\"Precedence Research\" tg-width=\"1000\" tg-height=\"592\"/>Precedence Research<h4 id=\"id_21983917\">Local Consumer Services</h4>The Local Consumer Services segment of Alibaba encompasses a range of diverse services designed to cater to various consumer needs. Among these services are Ele.me, a prominent on-demand delivery platform, Amap, providing digital mapping services along with real-time traffic information, Fliggy, an online travel platform, and Taoxianda, a platform aiding retailers in establishing and managing online stores.<h4 id=\"id_2699114686\">Cainiao - Platform Delivery China</h4>Cainiao, a company 70% owned by Alibaba following its acquisition of the majority stake in 2017, specializes in logistics. Serving as a crucial complement to Alibaba&#39;s e-commerce operations in China, Cainiao plays a pivotal role in ensuring timely deliveries within China, often achieving the impressive feat of completing deliveries in less than 24 hours.Notably, the platform delivery segment has experienced recent growth, propelled by the surge in e-commerce sales. Projections indicate a continued growth rate of 5.15% for this market throughout 2027.<img src=\"https://static.tigerbbs.com/bd03ba9b4a58c40599efe510d0bd95e0\" alt=\"Author&#39;s Calculations with base on Statista\" title=\"Author&#39;s Calculations with base on Statista\" tg-width=\"640\" tg-height=\"385\"/>Author&#39;s Calculations with base on Statista<h4 id=\"id_2806472205\">Cloud - China</h4>Alibaba also boasts a formidable presence in the cloud segment, initially slated for a significant spinoff as part of a major strategic plan. This move garnered widespread acclaim from investors, given the robust prospects of the cloud market in China. Projections estimate a noteworthy growth rate of 20.44%, and the autonomy of an independent Alibaba Cloud company is anticipated to drive rapid revenue expansion and robust cash-flow growth, particularly considering the high profitability associated with cloud services.Notably, the projected growth rate of 20.44% for the Chinese cloud market closely aligns with the impressive revenue growth that Alibaba has consistently demonstrated within its cloud segment.<img src=\"https://static.tigerbbs.com/2c83a9ff7534361801c44c57f6842844\" alt=\"Author&#39;s Calculations with base on Statista\" title=\"Author&#39;s Calculations with base on Statista\" tg-width=\"640\" tg-height=\"385\"/>Author&#39;s Calculations with base on Statista<h4 id=\"id_1524553402\">Digital Media &amp; Entertainment - China</h4>The final segment in Alibaba&#39;s diverse portfolio is Digital Media and Entertainment, featuring key components such as Youku, a prominent video platform, and Alibaba Pictures, which encompasses intellectual property, licensing, and cinema ticketing management for the movie industry. Additionally, the company provides other content platforms and engages in the online gaming sector.Projections for the digital media market in China are optimistic, with an expected growth rate of 10.88%. This growth is anticipated to be fueled by the increasing revenue per user, projected to experience a substantial uptick of 7.6% from 2023 to 2027.<img src=\"https://static.tigerbbs.com/68b6148617c06e49a88276236a24288e\" alt=\"Statista\" title=\"Statista\" tg-width=\"640\" tg-height=\"402\"/>Statista<img src=\"https://static.tigerbbs.com/d15ed857ad6619ed880668554372e704\" alt=\"Statista\" title=\"Statista\" tg-width=\"640\" tg-height=\"378\"/>Statista<h2 id=\"id_3984174781\">Financial</h2>Alibaba has demonstrated remarkable revenue growth over the past six years. Since FY2018, the company has achieved an annual revenue growth rate of 35.68%. However, in a recent development, Alibaba experienced its first decline in revenue, with a year-over-year reduction of 5.97%.What stands out is the company&#39;s ability to consistently grow its net income, a crucial factor influencing a discounted cash flow (&#34;DCF&#34;) model. The net income has grown at a commendable annual rate of 15.57%, currently standing at $18.16 billion, though below the 2021 all-time high of $22.98 billion.In terms of margins, a noticeable downward trend is observed in both operating margin and net income margin. In FY2018, these metrics were above 25%, with the operating margin at 28.21% and the net income margin at 25.61%. As of the latest earnings release, both metrics have decreased to 14.66% and 14.50%, respectively.<img src=\"https://static.tigerbbs.com/960c6966b32c3d6338927f89928133eb\" alt=\"Author&#39;s Calculations\" title=\"Author&#39;s Calculations\" tg-width=\"640\" tg-height=\"384\"/>Author&#39;s Calculations<img src=\"https://static.tigerbbs.com/c879d4d20ebba8a4b090bf207e7fdaa6\" alt=\"Author&#39;s Calculations\" title=\"Author&#39;s Calculations\" tg-width=\"640\" tg-height=\"389\"/>Author&#39;s CalculationsAlibaba&#39;s financial foundation appears robust, with a substantial cash reserve of $78.66 billion and a comparatively low debt burden. Long-term debt stands at $21.71 billion, while short-term debt is at $5.4 billion.<img src=\"https://static.tigerbbs.com/29d34db56f2ac763355ca3f8ce4693ef\" alt=\"Author&#39;s Calculations\" title=\"Author&#39;s Calculations\" tg-width=\"640\" tg-height=\"391\"/>Author&#39;s CalculationsDespite the overall positive financial outlook, Alibaba&#39;s free cash flow has experienced annual growth of 9.38%. The free cash flow margin, however, has seen a significant decrease from FY2018&#39;s 36.6% to the current level of 18.2%. This indicates a potential decrease in efficiency, and Alibaba attributes this shift to the presence of project-based contracts, which inherently have lower margins. The company is actively working to reduce the impact of these contracts to enhance overall margins.<img src=\"https://static.tigerbbs.com/bd64025d13a547be8d4e59fe5383e405\" alt=\"Author&#39;s Calculations\" title=\"Author&#39;s Calculations\" tg-width=\"640\" tg-height=\"461\"/>Author&#39;s Calculations<img src=\"https://static.tigerbbs.com/b5ab121ecbf172e600e9baf213607a57\" alt=\"Author&#39;s Calculations\" title=\"Author&#39;s Calculations\" tg-width=\"640\" tg-height=\"476\"/>Author&#39;s Calculations<img src=\"https://static.tigerbbs.com/1e791c46f8ca163f7aa30e11f9d6c939\" alt=\"Author&#39;s Calculations\" title=\"Author&#39;s Calculations\" tg-width=\"640\" tg-height=\"358\"/>Author&#39;s Calculations<h2 id=\"id_3734509088\">Valuation</h2>In this valuation of Alibaba, I will employ two distinct models: the first relies on analysts&#39; estimates for revenue and net income, while the second model involves my own estimates formulated from scratch. These estimates are based on the anticipated growth rates within the markets of each of Alibaba&#39;s operating segments.The table below outlines the assumptions integral to calculating Alibaba&#39;s fair stock price. Notably, D&amp;A, interest expenses, and CapEx will be computed using margins tied to revenue.Ultimately, the WACC will be derived from variables such as equity value, debt value, and the cost of debt, utilizing the widely recognized formula.For FY2023 and FY2024, analysts anticipate revenues of $133.3 billion and $145.93 billion, respectively. Subsequently, for FY2026-2029, I will apply an expected forward revenue growth rate of 4.87%.<table style=\"border-collapse:collapse;\"><colgroup><col/><col/></colgroup><tbody><tr><td colspan=\"2\" style=\"text-align:left;\">TABLE OF ASSUMPTIONS</td></tr><tr><td style=\"text-align:left;\">(Current data)</td><td style=\"text-align:left;\"></td></tr><tr><td style=\"text-align:left;\">Assumptions Part 1</td><td style=\"text-align:left;\"></td></tr><tr><td style=\"text-align:left;\"></td><td style=\"text-align:left;\"></td></tr><tr><td style=\"text-align:left;\">Equity Value</td><td style=\"text-align:left;\">141,772.60</td></tr><tr><td style=\"text-align:left;\">Debt Value</td><td style=\"text-align:left;\">27,182.30</td></tr><tr><td style=\"text-align:left;\">Cost of Debt</td><td style=\"text-align:left;\">3.49%</td></tr><tr><td style=\"text-align:left;\">Tax Rate</td><td style=\"text-align:left;\">12.76%</td></tr><tr><td style=\"text-align:left;\">10y Treasury</td><td style=\"text-align:left;\">4.80%</td></tr><tr><td style=\"text-align:left;\">Beta</td><td style=\"text-align:left;\">0.89</td></tr><tr><td style=\"text-align:left;\">Market Return</td><td style=\"text-align:left;\">10.50%</td></tr><tr><td style=\"text-align:left;\">Cost of Equity</td><td style=\"text-align:left;\">9.87%</td></tr><tr><td style=\"text-align:left;\">Assumptions Part 2</td><td style=\"text-align:left;\"></td></tr><tr><td style=\"text-align:left;\">CapEx</td><td style=\"text-align:left;\">4,702.10</td></tr><tr><td style=\"text-align:left;\">Capex Margin</td><td style=\"text-align:left;\">3.75%</td></tr><tr><td style=\"text-align:left;\">Net Income</td><td style=\"text-align:left;\">18,168.20</td></tr><tr><td style=\"text-align:left;\">Interest</td><td style=\"text-align:left;\">948.40</td></tr><tr><td style=\"text-align:left;\">Tax</td><td style=\"text-align:left;\">2,656.80</td></tr><tr><td style=\"text-align:left;\">D&amp;A</td><td style=\"text-align:left;\">6,245.60</td></tr><tr><td style=\"text-align:left;\">Ebitda</td><td style=\"text-align:left;\">28,019.00</td></tr><tr><td style=\"text-align:left;\"></td><td style=\"text-align:left;\"></td></tr><tr><td style=\"text-align:left;\">D&amp;A Margin</td><td style=\"text-align:left;\">4.98%</td></tr><tr><td style=\"text-align:left;\">Interest Expense Margin</td><td style=\"text-align:left;\">0.76%</td></tr><tr><td style=\"text-align:left;\">Revenue</td><td style=\"text-align:left;\">125,311.9</td></tr></tbody></table><h3 id=\"id_56021089\">Analysts&#39; Estimates</h3>For FY2023 and FY2024, analysts are anticipating revenues of $133.3 billion and $145.93 billion, respectively. Looking ahead to FY2026-2029, a forward revenue growth rate of 4.87% will be applied.In terms of net income, analysts project an EPS of $8.92, translating to a net income of $22.63 billion for FY2024. For FY2025, the estimate increases to an EPS of $9.75, corresponding to a net income of $24.74 billion. Subsequently, for FY2026-2029, the anticipated 3-5 year long-term expected EPS growth rate of 17.45% will be applied.<table style=\"border-collapse:collapse;\"><colgroup><col/><col/><col/><col/><col/><col/></colgroup><tbody><tr><td style=\"text-align:left;\"></td><td style=\"text-align:left;\">Revenue</td><td style=\"text-align:left;\">Net Income</td><td style=\"text-align:left;\">Plus Taxes</td><td style=\"text-align:left;\">Plus D&amp;A</td><td style=\"text-align:left;\">Plus Interest</td></tr><tr><td style=\"text-align:left;\">2023</td><td style=\"text-align:left;\">$133,310.0</td><td style=\"text-align:left;\">$22,634.50</td><td style=\"text-align:left;\">$25,522.15</td><td style=\"text-align:left;\">$32,104.47</td><td style=\"text-align:left;\">$33,104.00</td></tr><tr><td style=\"text-align:left;\">2024</td><td style=\"text-align:left;\">$145,930.0</td><td style=\"text-align:left;\">$24,740.63</td><td style=\"text-align:left;\">$27,896.97</td><td style=\"text-align:left;\">$34,479.29</td><td style=\"text-align:left;\">$35,478.82</td></tr><tr><td style=\"text-align:left;\">2025</td><td style=\"text-align:left;\">$152,715.7</td><td style=\"text-align:left;\">$29,057.86</td><td style=\"text-align:left;\">$32,764.99</td><td style=\"text-align:left;\">$40,305.48</td><td style=\"text-align:left;\">$41,450.52</td></tr><tr><td style=\"text-align:left;\">2026</td><td style=\"text-align:left;\">$159,817.0</td><td style=\"text-align:left;\">$34,128.46</td><td style=\"text-align:left;\">$38,482.48</td><td style=\"text-align:left;\">$46,373.61</td><td style=\"text-align:left;\">$47,571.88</td></tr><tr><td style=\"text-align:left;\">2027</td><td style=\"text-align:left;\">$167,248.5</td><td style=\"text-align:left;\">$40,083.88</td><td style=\"text-align:left;\">$45,197.68</td><td style=\"text-align:left;\">$53,455.74</td><td style=\"text-align:left;\">$54,709.73</td></tr><tr><td style=\"text-align:left;\">2028</td><td style=\"text-align:left;\">$175,025.6</td><td style=\"text-align:left;\">$47,078.51</td><td style=\"text-align:left;\">$53,084.67</td><td style=\"text-align:left;\">$61,726.73</td><td style=\"text-align:left;\">$63,039.04</td></tr><tr><td style=\"text-align:left;\"></td><td style=\"text-align:left;\"></td><td style=\"text-align:left;\"></td><td style=\"text-align:left;\"></td><td style=\"text-align:left;\"></td><td style=\"text-align:left;\">^Final EBITA^</td></tr></tbody></table><img src=\"https://static.tigerbbs.com/90a2b3d81905562e6d4cd4d6443240d7\" alt=\"Author&#39;s Calculations\" title=\"Author&#39;s Calculations\" tg-width=\"640\" tg-height=\"679\"/>Author&#39;s CalculationsThe initial model suggests that Alibaba is undervalued by a significant margin, approximately 161.9%. According to this model, the fair stock price is estimated to be $204.9, closely aligning with the stock price on July 9, 2021, when the stock traded at $205.94, a period within the onset of the bear market.Additionally, the model indicates a projected future stock price of $274.7. This implies a potential gain of 41.9% until 2028, aligning with Alibaba&#39;s FY2029.<img src=\"https://static.tigerbbs.com/0901371041fe275255a832be806605b0\" alt=\"Seeking Alpha\" title=\"Seeking Alpha\" tg-width=\"640\" tg-height=\"344\"/>Seeking Alpha<h3 id=\"id_3561401362\">My Estimates</h3>In this alternative model, I have projected the growth of each of Alibaba&#39;s segments based on the expected CAGR in their respective markets. The Chinese Retail &amp; Wholesale segments are forecasted to grow at a CAGR of 8.21%, International Retail &amp; Wholesale at 15%, Cainiao in the Platform Delivery market at 5.15%, Chinese cloud at 20.44%, and Chinese Digital Media &amp; Entertainment at a rate of 10.88%. For Local Consumer Services, where estimating revenues is challenging, a conservative growth rate of 5% has been applied, which is notably below the current YoY growth of 16% for this segment.<img src=\"https://static.tigerbbs.com/a0aba12ef54f1700a42b67ae82e18682\" alt=\"Author&#39;s Calculations\" title=\"Author&#39;s Calculations\" tg-width=\"640\" tg-height=\"98\"/>Author&#39;s Calculations<table style=\"border-collapse:collapse;\"><colgroup><col/><col/><col/><col/><col/><col/></colgroup><tbody><tr><td style=\"text-align:left;\"></td><td style=\"text-align:left;\">Revenue</td><td style=\"text-align:left;\">Net Income</td><td style=\"text-align:left;\">Plus Taxes</td><td style=\"text-align:left;\">Plus D&amp;A</td><td style=\"text-align:left;\">Plus Interest</td></tr><tr><td style=\"text-align:left;\">FY 2024</td><td style=\"text-align:left;\">$125,311.9</td><td style=\"text-align:left;\">$18,170.23</td><td style=\"text-align:left;\">$20,488.34</td><td style=\"text-align:left;\">$26,733.94</td><td style=\"text-align:left;\">$27,682.34</td></tr><tr><td style=\"text-align:left;\">FY 2025</td><td style=\"text-align:left;\">$137,322.4</td><td style=\"text-align:left;\">$19,911.75</td><td style=\"text-align:left;\">$22,452.04</td><td style=\"text-align:left;\">$28,697.64</td><td style=\"text-align:left;\">$29,646.04</td></tr><tr><td style=\"text-align:left;\">FY 2026</td><td style=\"text-align:left;\">$150,693.7</td><td style=\"text-align:left;\">$21,850.58</td><td style=\"text-align:left;\">$24,638.23</td><td style=\"text-align:left;\">$32,148.86</td><td style=\"text-align:left;\">$33,289.36</td></tr><tr><td style=\"text-align:left;\">FY 2027</td><td style=\"text-align:left;\">$165,610.7</td><td style=\"text-align:left;\">$24,013.55</td><td style=\"text-align:left;\">$27,077.14</td><td style=\"text-align:left;\">$35,331.25</td><td style=\"text-align:left;\">$36,584.65</td></tr><tr><td style=\"text-align:left;\">FY 2028</td><td style=\"text-align:left;\">$182,287.9</td><td style=\"text-align:left;\">$26,431.75</td><td style=\"text-align:left;\">$29,803.84</td><td style=\"text-align:left;\">$38,889.16</td><td style=\"text-align:left;\">$40,268.77</td></tr><tr><td style=\"text-align:left;\">FY 2029</td><td style=\"text-align:left;\">$200,974.3</td><td style=\"text-align:left;\">$29,141.27</td><td style=\"text-align:left;\">$32,859.04</td><td style=\"text-align:left;\">$42,875.69</td><td style=\"text-align:left;\">$44,396.73</td></tr><tr><td style=\"text-align:left;\"></td><td style=\"text-align:left;\"></td><td style=\"text-align:left;\"></td><td style=\"text-align:left;\"></td><td style=\"text-align:left;\"></td><td style=\"text-align:left;\">^Final EBITA^</td></tr></tbody></table>Author&#39;s CalculationsThis more conservative model suggests a fair price of $148.1, indicating an upside of 89.3% from the current stock price of $78.2. Looking ahead to FY2029, the projected stock price is $184.2, translating into annual returns of 22.6%. While not as high as the previous model, these returns are still substantial and attractive.<h2 id=\"id_3686040600\">Risks to Thesis</h2>The primary risk factor in this bullish thesis revolves around the influence exerted by the Chinese Government. The government&#39;s control over corporations, as evidenced by the halt in the Ant Group&#39;s IPO in Hong Kong, poses a considerable risk. If there were a concerted effort to sideline Jack Ma, a key figure in the company&#39;s direction, it could deliver a significant intellectual blow to Alibaba. In such a scenario, the company would need to secure an equally capable protector, given Ma&#39;s influential role despite not holding the CEO position.Secondly, there exists the risk of a severe Chinese recession impacting Alibaba&#39;s sales volume. With over 65% of e-commerce revenues hinging on the Chinese market, the company is vulnerable to economic downturns. This vulnerability extends beyond e-commerce to include entertainment platforms and Cainiao, which is intricately tied to e-commerce operations.Lastly, there is the risk of a foreign competitor, such as Amazon.com, Inc. (AMZN), succeeding in growing aggressively within the Chinese market. Alibaba&#39;s lack of logistical infrastructure in the US to counterbalance Amazon&#39;s influence could position the company unfavorably in the long term. To mitigate this risk, Alibaba would need to consider strategic expansion into other markets.<h2 id=\"id_2850560331\">Conclusion</h2>In conclusion, Alibaba Group Holdings Limited emerges as a compelling investment opportunity marked by a resilient business model and diversified revenue streams. Despite recent challenges and regulatory uncertainties, the company&#39;s strategic segments, including e-commerce, cloud, and logistics, showcase robust growth potential domestically and internationally.Throughout two DCF models, we observe that Alibaba&#39;s undervaluation could be as high as 161.9% considering analysts&#39; estimates. However, to make it more conservative, I conducted my own estimates which suggest that Alibaba is undervalued by 89.3%. After conducting the two models, I am assigning Alibaba a stock price target of $148.1, which is an 89.3% upside from the current stock price of $78.2. Furthermore, the stock could reach a price of $184.2 in FY 2029 (year 2028), which translates into 22.4% annual returns.The undervaluation indicators, coupled with the recent stock pullback, suggest this is an attractive entry point for Alibaba Group Holding Limited stock, but investors must remain vigilant to risks associated with governmental influence, economic downturns, and foreign competition. Alibaba&#39;s adeptness in navigating these challenges, coupled with its financial strength and strategic positioning, positions it favorably for long-term growth.Editor&#39;s Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.</body></html>","source":"seekingalpha","collect":0,"html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Alibaba Is Hugely Undervalued?</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nAlibaba Is Hugely Undervalued?\n</h2>\n\n<h4 class=\"meta\">\n\n\n2023-11-23 15:00 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4653737-alibaba-is-hugely-undervalued>Seeking Alpha</a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\nAlibaba Group Holding Limited offers a compelling investment opportunity with a diversified portfolio spanning e-commerce, cloud services, logistics, and digital media, providing resilience in a ...\n\n<a href=\"https://seekingalpha.com/article/4653737-alibaba-is-hugely-undervalued\">Web Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","type":0,"thumbnail":"","relate_stocks":{"LU0053666078.USD":"摩根大通基金-美国股票A（离岸）美元","IE00B19Z9505.USD":"美盛-美国大盘成长股A Acc","LU0079474960.USD":"联博美国增长基金A","BK4559":"巴菲特持仓","BK4538":"云计算","LU0082616367.USD":"摩根大通美国科技A（dist）","GB00BDT5M118.USD":"天利环球扩展Alpha基金A Acc","09988":"阿里巴巴-W","IE0004445239.USD":"JANUS HENDERSON US FORTY \"A2\" (USD) ACC","BK4550":"红杉资本持仓","LU0061474960.USD":"天利环球焦点基金AU Acc","LU0353189680.USD":"富国美国全盘成长基金Cl A Acc","BK4122":"互联网与直销零售","LU0072913022.USD":"UBS (LUX) EQUITY FUND - 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Additionally, the company abandoned its plans to spin off its cloud business, citing uncertainties in the growth trajectory caused by the U.S.-imposed restrictions on AI chip imports.Nevertheless, in this article, I will elucidate using two valuation models why Alibaba is significantly undervalued, marking an undervaluation of up to 80%. This substantial undervaluation provides a considerable margin of security for investors, warranting a \"strong buy\" recommendation. I propose a fair price of $148.1 for the stock.OverviewFQ2 2024 AlibabaFY 2023Q2 2024 EarningsIn FQ2 2024, Alibaba outperformed expectations in earnings but fell short on revenue, with a notable miss of $230 million. Despite this, the company reported an impressive EPS of $2.14, surpassing the consensus by $0.05.The most significant blow to these earnings results came as Alibaba opted to abandon its plan to spin off its cloud business. The rationale behind this decision was a belief that the spin-off would not deliver the anticipated shareholder value. Furthermore, the company pointed to the current export restrictions on AI chips imposed by the U.S., which has cast uncertainty over the prospects of its cloud segment.Adding to the challenges, Alibaba disclosed that Jack Ma's family trust intends to sell 10 million shares valued at $870.71 million on November 21.MarketE-Commerce ChinaAlibaba's primary focus lies in e-commerce, as illustrated in the table below, with a significant dependency on China, representing 67% of this segment. However, since 2021, Alibaba has successfully reduced its reliance on the Chinese market by 3%.In addition to its Chinese and international e-commerce segments, Alibaba operates in the \"wholesale\" segment. This facet involves collaboration with Chinese factories, functioning in a producer-to-consumer model. Notably, the cost per unit decreases with higher purchase quantities.Projections indicate an anticipated growth rate of 8.21% for the Chinese e-commerce market throughout 2027. In contrast, the global e-commerce market is expected to experience a more robust growth rate of approximately 15% by 2032.StatistaPrecedence ResearchLocal Consumer ServicesThe Local Consumer Services segment of Alibaba encompasses a range of diverse services designed to cater to various consumer needs. Among these services are Ele.me, a prominent on-demand delivery platform, Amap, providing digital mapping services along with real-time traffic information, Fliggy, an online travel platform, and Taoxianda, a platform aiding retailers in establishing and managing online stores.Cainiao - Platform Delivery ChinaCainiao, a company 70% owned by Alibaba following its acquisition of the majority stake in 2017, specializes in logistics. Serving as a crucial complement to Alibaba's e-commerce operations in China, Cainiao plays a pivotal role in ensuring timely deliveries within China, often achieving the impressive feat of completing deliveries in less than 24 hours.Notably, the platform delivery segment has experienced recent growth, propelled by the surge in e-commerce sales. Projections indicate a continued growth rate of 5.15% for this market throughout 2027.Author's Calculations with base on StatistaCloud - ChinaAlibaba also boasts a formidable presence in the cloud segment, initially slated for a significant spinoff as part of a major strategic plan. This move garnered widespread acclaim from investors, given the robust prospects of the cloud market in China. Projections estimate a noteworthy growth rate of 20.44%, and the autonomy of an independent Alibaba Cloud company is anticipated to drive rapid revenue expansion and robust cash-flow growth, particularly considering the high profitability associated with cloud services.Notably, the projected growth rate of 20.44% for the Chinese cloud market closely aligns with the impressive revenue growth that Alibaba has consistently demonstrated within its cloud segment.Author's Calculations with base on StatistaDigital Media & Entertainment - ChinaThe final segment in Alibaba's diverse portfolio is Digital Media and Entertainment, featuring key components such as Youku, a prominent video platform, and Alibaba Pictures, which encompasses intellectual property, licensing, and cinema ticketing management for the movie industry. Additionally, the company provides other content platforms and engages in the online gaming sector.Projections for the digital media market in China are optimistic, with an expected growth rate of 10.88%. This growth is anticipated to be fueled by the increasing revenue per user, projected to experience a substantial uptick of 7.6% from 2023 to 2027.StatistaStatistaFinancialAlibaba has demonstrated remarkable revenue growth over the past six years. Since FY2018, the company has achieved an annual revenue growth rate of 35.68%. However, in a recent development, Alibaba experienced its first decline in revenue, with a year-over-year reduction of 5.97%.What stands out is the company's ability to consistently grow its net income, a crucial factor influencing a discounted cash flow (\"DCF\") model. The net income has grown at a commendable annual rate of 15.57%, currently standing at $18.16 billion, though below the 2021 all-time high of $22.98 billion.In terms of margins, a noticeable downward trend is observed in both operating margin and net income margin. In FY2018, these metrics were above 25%, with the operating margin at 28.21% and the net income margin at 25.61%. As of the latest earnings release, both metrics have decreased to 14.66% and 14.50%, respectively.Author's CalculationsAuthor's CalculationsAlibaba's financial foundation appears robust, with a substantial cash reserve of $78.66 billion and a comparatively low debt burden. Long-term debt stands at $21.71 billion, while short-term debt is at $5.4 billion.Author's CalculationsDespite the overall positive financial outlook, Alibaba's free cash flow has experienced annual growth of 9.38%. The free cash flow margin, however, has seen a significant decrease from FY2018's 36.6% to the current level of 18.2%. This indicates a potential decrease in efficiency, and Alibaba attributes this shift to the presence of project-based contracts, which inherently have lower margins. The company is actively working to reduce the impact of these contracts to enhance overall margins.Author's CalculationsAuthor's CalculationsAuthor's CalculationsValuationIn this valuation of Alibaba, I will employ two distinct models: the first relies on analysts' estimates for revenue and net income, while the second model involves my own estimates formulated from scratch. These estimates are based on the anticipated growth rates within the markets of each of Alibaba's operating segments.The table below outlines the assumptions integral to calculating Alibaba's fair stock price. Notably, D&A, interest expenses, and CapEx will be computed using margins tied to revenue.Ultimately, the WACC will be derived from variables such as equity value, debt value, and the cost of debt, utilizing the widely recognized formula.For FY2023 and FY2024, analysts anticipate revenues of $133.3 billion and $145.93 billion, respectively. Subsequently, for FY2026-2029, I will apply an expected forward revenue growth rate of 4.87%.TABLE OF ASSUMPTIONS(Current data)Assumptions Part 1Equity Value141,772.60Debt Value27,182.30Cost of Debt3.49%Tax Rate12.76%10y Treasury4.80%Beta0.89Market Return10.50%Cost of Equity9.87%Assumptions Part 2CapEx4,702.10Capex Margin3.75%Net Income18,168.20Interest948.40Tax2,656.80D&A6,245.60Ebitda28,019.00D&A Margin4.98%Interest Expense Margin0.76%Revenue125,311.9Analysts' EstimatesFor FY2023 and FY2024, analysts are anticipating revenues of $133.3 billion and $145.93 billion, respectively. Looking ahead to FY2026-2029, a forward revenue growth rate of 4.87% will be applied.In terms of net income, analysts project an EPS of $8.92, translating to a net income of $22.63 billion for FY2024. For FY2025, the estimate increases to an EPS of $9.75, corresponding to a net income of $24.74 billion. Subsequently, for FY2026-2029, the anticipated 3-5 year long-term expected EPS growth rate of 17.45% will be applied.RevenueNet IncomePlus TaxesPlus D&APlus Interest2023$133,310.0$22,634.50$25,522.15$32,104.47$33,104.002024$145,930.0$24,740.63$27,896.97$34,479.29$35,478.822025$152,715.7$29,057.86$32,764.99$40,305.48$41,450.522026$159,817.0$34,128.46$38,482.48$46,373.61$47,571.882027$167,248.5$40,083.88$45,197.68$53,455.74$54,709.732028$175,025.6$47,078.51$53,084.67$61,726.73$63,039.04^Final EBITA^Author's CalculationsThe initial model suggests that Alibaba is undervalued by a significant margin, approximately 161.9%. According to this model, the fair stock price is estimated to be $204.9, closely aligning with the stock price on July 9, 2021, when the stock traded at $205.94, a period within the onset of the bear market.Additionally, the model indicates a projected future stock price of $274.7. This implies a potential gain of 41.9% until 2028, aligning with Alibaba's FY2029.Seeking AlphaMy EstimatesIn this alternative model, I have projected the growth of each of Alibaba's segments based on the expected CAGR in their respective markets. The Chinese Retail & Wholesale segments are forecasted to grow at a CAGR of 8.21%, International Retail & Wholesale at 15%, Cainiao in the Platform Delivery market at 5.15%, Chinese cloud at 20.44%, and Chinese Digital Media & Entertainment at a rate of 10.88%. For Local Consumer Services, where estimating revenues is challenging, a conservative growth rate of 5% has been applied, which is notably below the current YoY growth of 16% for this segment.Author's CalculationsRevenueNet IncomePlus TaxesPlus D&APlus InterestFY 2024$125,311.9$18,170.23$20,488.34$26,733.94$27,682.34FY 2025$137,322.4$19,911.75$22,452.04$28,697.64$29,646.04FY 2026$150,693.7$21,850.58$24,638.23$32,148.86$33,289.36FY 2027$165,610.7$24,013.55$27,077.14$35,331.25$36,584.65FY 2028$182,287.9$26,431.75$29,803.84$38,889.16$40,268.77FY 2029$200,974.3$29,141.27$32,859.04$42,875.69$44,396.73^Final EBITA^Author's CalculationsThis more conservative model suggests a fair price of $148.1, indicating an upside of 89.3% from the current stock price of $78.2. Looking ahead to FY2029, the projected stock price is $184.2, translating into annual returns of 22.6%. While not as high as the previous model, these returns are still substantial and attractive.Risks to ThesisThe primary risk factor in this bullish thesis revolves around the influence exerted by the Chinese Government. The government's control over corporations, as evidenced by the halt in the Ant Group's IPO in Hong Kong, poses a considerable risk. If there were a concerted effort to sideline Jack Ma, a key figure in the company's direction, it could deliver a significant intellectual blow to Alibaba. In such a scenario, the company would need to secure an equally capable protector, given Ma's influential role despite not holding the CEO position.Secondly, there exists the risk of a severe Chinese recession impacting Alibaba's sales volume. With over 65% of e-commerce revenues hinging on the Chinese market, the company is vulnerable to economic downturns. This vulnerability extends beyond e-commerce to include entertainment platforms and Cainiao, which is intricately tied to e-commerce operations.Lastly, there is the risk of a foreign competitor, such as Amazon.com, Inc. (AMZN), succeeding in growing aggressively within the Chinese market. Alibaba's lack of logistical infrastructure in the US to counterbalance Amazon's influence could position the company unfavorably in the long term. To mitigate this risk, Alibaba would need to consider strategic expansion into other markets.ConclusionIn conclusion, Alibaba Group Holdings Limited emerges as a compelling investment opportunity marked by a resilient business model and diversified revenue streams. Despite recent challenges and regulatory uncertainties, the company's strategic segments, including e-commerce, cloud, and logistics, showcase robust growth potential domestically and internationally.Throughout two DCF models, we observe that Alibaba's undervaluation could be as high as 161.9% considering analysts' estimates. However, to make it more conservative, I conducted my own estimates which suggest that Alibaba is undervalued by 89.3%. After conducting the two models, I am assigning Alibaba a stock price target of $148.1, which is an 89.3% upside from the current stock price of $78.2. Furthermore, the stock could reach a price of $184.2 in FY 2029 (year 2028), which translates into 22.4% annual returns.The undervaluation indicators, coupled with the recent stock pullback, suggest this is an attractive entry point for Alibaba Group Holding Limited stock, but investors must remain vigilant to risks associated with governmental influence, economic downturns, and foreign competition. Alibaba's adeptness in navigating these challenges, coupled with its financial strength and strategic positioning, positions it favorably for long-term growth.Editor's Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.","news_type":1},"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":244532142936256,"gmtCreate":1700724141508,"gmtModify":1700724146102,"author":{"id":"4110855522753532","authorId":"4110855522753532","name":"sjsjsj","avatar":"https://community-static.tradeup.com/news/5b28fa3a14f65b1818e59048a05a22ed","vip":1,"crmLevel":5,"crmLevelSwitch":0,"idStr":"4110855522753532","authorIdStr":"4110855522753532"},"htmlText":"Sounds good....👍","listText":"Sounds good....👍","text":"Sounds good....👍","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":1,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/244532142936256","repostId":2385466779,"repostType":2,"repost":{"id":"2385466779","pubTimestamp":1700722800,"share":"https://ttm.financial/m/news/2385466779?lang=&edition=fundamental","pubTime":"2023-11-23 15:00","market":"us","language":"en","title":"Alibaba Is Hugely Undervalued?","url":"https://stock-news.laohu8.com/highlight/detail?id=2385466779","media":"Seeking Alpha","summary":"Alibaba Group Holding Limited offers a compelling investment opportunity with a diversified portfolio spanning e-commerce, cloud services, logistics, and digital media, providing resilience in a dynam","content":"<html><head></head><body><ul style=\"\"><li>Alibaba Group Holding Limited offers a compelling investment opportunity with a diversified portfolio spanning e-commerce, cloud services, logistics, and digital media, providing resilience in a dynamic market.</li><li>Despite recent challenges and regulatory uncertainties, Alibaba&#39;s strategic segments, both domestically and internationally, showcase robust growth potential, emphasizing the company&#39;s adaptability and innovation.</li><li>The recent stock pullback, coupled with an undervaluation that could be as high as 161.9%, presents an attractive entry point for investors looking to capitalize on Alibaba&#39;s long-term growth prospects.</li><li>Investors must remain vigilant to potential risks, including governmental influence, economic downturns, and competition from foreign players, acknowledging the nuanced balance between Alibaba&#39;s strengths and external factors.</li><li>Alibaba&#39;s solid financial foundation, diversified revenue streams, and strategic positioning position it favorably for long-term growth, making it a promising investment choice.</li></ul><img src=\"https://static.tigerbbs.com/84b6aeab08dc480ef3a214462aadfcfd\" title=\"Robert Way\" tg-width=\"750\" tg-height=\"500\"/>Robert Way<h2 id=\"id_522885472\">Thesis</h2>After the release of FQ2 2024, Alibaba Group Holding Limited (NYSE:BABA) experienced a 10% decline as the company fell short of revenue expectations by $250 million, despite EPS estimates. Additionally, the company abandoned its plans to spin off its cloud business, citing uncertainties in the growth trajectory caused by the U.S.-imposed restrictions on AI chip imports.Nevertheless, in this article, I will elucidate using two valuation models why Alibaba is significantly undervalued, marking an undervaluation of up to 80%. This substantial undervaluation provides a considerable margin of security for investors, warranting a &#34;strong buy&#34; recommendation. I propose a fair price of $148.1 for the stock.<h2 id=\"id_1987249582\">Overview</h2><img src=\"https://static.tigerbbs.com/081c2dd239fb542c7136a40c1b6c2ad1\" alt=\"FQ2 2024 Alibaba\" title=\"FQ2 2024 Alibaba\" tg-width=\"640\" tg-height=\"133\"/>FQ2 2024 Alibaba<img src=\"https://static.tigerbbs.com/e6bb4b66323db07420db79ea50a4c420\" alt=\"FY 2023\" title=\"FY 2023\" tg-width=\"640\" tg-height=\"417\"/>FY 2023<h3 id=\"id_3914187007\">Q2 2024 Earnings</h3>In FQ2 2024, Alibaba outperformed expectations in earnings but fell short on revenue, with a notable miss of $230 million. Despite this, the company reported an impressive EPS of $2.14, surpassing the consensus by $0.05.The most significant blow to these earnings results came as Alibaba opted to abandon its plan to spin off its cloud business. The rationale behind this decision was a belief that the spin-off would not deliver the anticipated shareholder value. Furthermore, the company pointed to the current export restrictions on AI chips imposed by the U.S., which has cast uncertainty over the prospects of its cloud segment.Adding to the challenges, Alibaba disclosed that Jack Ma&#39;s family trust intends to sell 10 million shares valued at $870.71 million on November 21.<h3 id=\"id_2851468396\">Market</h3><h4 id=\"id_4264278908\">E-Commerce China</h4>Alibaba&#39;s primary focus lies in e-commerce, as illustrated in the table below, with a significant dependency on China, representing 67% of this segment. However, since 2021, Alibaba has successfully reduced its reliance on the Chinese market by 3%.In addition to its Chinese and international e-commerce segments, Alibaba operates in the &#34;wholesale&#34; segment. This facet involves collaboration with Chinese factories, functioning in a producer-to-consumer model. Notably, the cost per unit decreases with higher purchase quantities.Projections indicate an anticipated growth rate of 8.21% for the Chinese e-commerce market throughout 2027. In contrast, the global e-commerce market is expected to experience a more robust growth rate of approximately 15% by 2032.<img src=\"https://static.tigerbbs.com/cb5ffc078e262abf6dae01b3008e5789\" alt=\"Statista\" title=\"Statista\" tg-width=\"640\" tg-height=\"340\"/>Statista<img src=\"https://static.tigerbbs.com/fa869592dad3d103e32094e603a07313\" alt=\"Precedence Research\" title=\"Precedence Research\" tg-width=\"1000\" tg-height=\"592\"/>Precedence Research<h4 id=\"id_21983917\">Local Consumer Services</h4>The Local Consumer Services segment of Alibaba encompasses a range of diverse services designed to cater to various consumer needs. Among these services are Ele.me, a prominent on-demand delivery platform, Amap, providing digital mapping services along with real-time traffic information, Fliggy, an online travel platform, and Taoxianda, a platform aiding retailers in establishing and managing online stores.<h4 id=\"id_2699114686\">Cainiao - Platform Delivery China</h4>Cainiao, a company 70% owned by Alibaba following its acquisition of the majority stake in 2017, specializes in logistics. Serving as a crucial complement to Alibaba&#39;s e-commerce operations in China, Cainiao plays a pivotal role in ensuring timely deliveries within China, often achieving the impressive feat of completing deliveries in less than 24 hours.Notably, the platform delivery segment has experienced recent growth, propelled by the surge in e-commerce sales. Projections indicate a continued growth rate of 5.15% for this market throughout 2027.<img src=\"https://static.tigerbbs.com/bd03ba9b4a58c40599efe510d0bd95e0\" alt=\"Author&#39;s Calculations with base on Statista\" title=\"Author&#39;s Calculations with base on Statista\" tg-width=\"640\" tg-height=\"385\"/>Author&#39;s Calculations with base on Statista<h4 id=\"id_2806472205\">Cloud - China</h4>Alibaba also boasts a formidable presence in the cloud segment, initially slated for a significant spinoff as part of a major strategic plan. This move garnered widespread acclaim from investors, given the robust prospects of the cloud market in China. Projections estimate a noteworthy growth rate of 20.44%, and the autonomy of an independent Alibaba Cloud company is anticipated to drive rapid revenue expansion and robust cash-flow growth, particularly considering the high profitability associated with cloud services.Notably, the projected growth rate of 20.44% for the Chinese cloud market closely aligns with the impressive revenue growth that Alibaba has consistently demonstrated within its cloud segment.<img src=\"https://static.tigerbbs.com/2c83a9ff7534361801c44c57f6842844\" alt=\"Author&#39;s Calculations with base on Statista\" title=\"Author&#39;s Calculations with base on Statista\" tg-width=\"640\" tg-height=\"385\"/>Author&#39;s Calculations with base on Statista<h4 id=\"id_1524553402\">Digital Media &amp; Entertainment - China</h4>The final segment in Alibaba&#39;s diverse portfolio is Digital Media and Entertainment, featuring key components such as Youku, a prominent video platform, and Alibaba Pictures, which encompasses intellectual property, licensing, and cinema ticketing management for the movie industry. Additionally, the company provides other content platforms and engages in the online gaming sector.Projections for the digital media market in China are optimistic, with an expected growth rate of 10.88%. This growth is anticipated to be fueled by the increasing revenue per user, projected to experience a substantial uptick of 7.6% from 2023 to 2027.<img src=\"https://static.tigerbbs.com/68b6148617c06e49a88276236a24288e\" alt=\"Statista\" title=\"Statista\" tg-width=\"640\" tg-height=\"402\"/>Statista<img src=\"https://static.tigerbbs.com/d15ed857ad6619ed880668554372e704\" alt=\"Statista\" title=\"Statista\" tg-width=\"640\" tg-height=\"378\"/>Statista<h2 id=\"id_3984174781\">Financial</h2>Alibaba has demonstrated remarkable revenue growth over the past six years. Since FY2018, the company has achieved an annual revenue growth rate of 35.68%. However, in a recent development, Alibaba experienced its first decline in revenue, with a year-over-year reduction of 5.97%.What stands out is the company&#39;s ability to consistently grow its net income, a crucial factor influencing a discounted cash flow (&#34;DCF&#34;) model. The net income has grown at a commendable annual rate of 15.57%, currently standing at $18.16 billion, though below the 2021 all-time high of $22.98 billion.In terms of margins, a noticeable downward trend is observed in both operating margin and net income margin. In FY2018, these metrics were above 25%, with the operating margin at 28.21% and the net income margin at 25.61%. As of the latest earnings release, both metrics have decreased to 14.66% and 14.50%, respectively.<img src=\"https://static.tigerbbs.com/960c6966b32c3d6338927f89928133eb\" alt=\"Author&#39;s Calculations\" title=\"Author&#39;s Calculations\" tg-width=\"640\" tg-height=\"384\"/>Author&#39;s Calculations<img src=\"https://static.tigerbbs.com/c879d4d20ebba8a4b090bf207e7fdaa6\" alt=\"Author&#39;s Calculations\" title=\"Author&#39;s Calculations\" tg-width=\"640\" tg-height=\"389\"/>Author&#39;s CalculationsAlibaba&#39;s financial foundation appears robust, with a substantial cash reserve of $78.66 billion and a comparatively low debt burden. Long-term debt stands at $21.71 billion, while short-term debt is at $5.4 billion.<img src=\"https://static.tigerbbs.com/29d34db56f2ac763355ca3f8ce4693ef\" alt=\"Author&#39;s Calculations\" title=\"Author&#39;s Calculations\" tg-width=\"640\" tg-height=\"391\"/>Author&#39;s CalculationsDespite the overall positive financial outlook, Alibaba&#39;s free cash flow has experienced annual growth of 9.38%. The free cash flow margin, however, has seen a significant decrease from FY2018&#39;s 36.6% to the current level of 18.2%. This indicates a potential decrease in efficiency, and Alibaba attributes this shift to the presence of project-based contracts, which inherently have lower margins. The company is actively working to reduce the impact of these contracts to enhance overall margins.<img src=\"https://static.tigerbbs.com/bd64025d13a547be8d4e59fe5383e405\" alt=\"Author&#39;s Calculations\" title=\"Author&#39;s Calculations\" tg-width=\"640\" tg-height=\"461\"/>Author&#39;s Calculations<img src=\"https://static.tigerbbs.com/b5ab121ecbf172e600e9baf213607a57\" alt=\"Author&#39;s Calculations\" title=\"Author&#39;s Calculations\" tg-width=\"640\" tg-height=\"476\"/>Author&#39;s Calculations<img src=\"https://static.tigerbbs.com/1e791c46f8ca163f7aa30e11f9d6c939\" alt=\"Author&#39;s Calculations\" title=\"Author&#39;s Calculations\" tg-width=\"640\" tg-height=\"358\"/>Author&#39;s Calculations<h2 id=\"id_3734509088\">Valuation</h2>In this valuation of Alibaba, I will employ two distinct models: the first relies on analysts&#39; estimates for revenue and net income, while the second model involves my own estimates formulated from scratch. These estimates are based on the anticipated growth rates within the markets of each of Alibaba&#39;s operating segments.The table below outlines the assumptions integral to calculating Alibaba&#39;s fair stock price. Notably, D&amp;A, interest expenses, and CapEx will be computed using margins tied to revenue.Ultimately, the WACC will be derived from variables such as equity value, debt value, and the cost of debt, utilizing the widely recognized formula.For FY2023 and FY2024, analysts anticipate revenues of $133.3 billion and $145.93 billion, respectively. Subsequently, for FY2026-2029, I will apply an expected forward revenue growth rate of 4.87%.<table style=\"border-collapse:collapse;\"><colgroup><col/><col/></colgroup><tbody><tr><td colspan=\"2\" style=\"text-align:left;\">TABLE OF ASSUMPTIONS</td></tr><tr><td style=\"text-align:left;\">(Current data)</td><td style=\"text-align:left;\"></td></tr><tr><td style=\"text-align:left;\">Assumptions Part 1</td><td style=\"text-align:left;\"></td></tr><tr><td style=\"text-align:left;\"></td><td style=\"text-align:left;\"></td></tr><tr><td style=\"text-align:left;\">Equity Value</td><td style=\"text-align:left;\">141,772.60</td></tr><tr><td style=\"text-align:left;\">Debt Value</td><td style=\"text-align:left;\">27,182.30</td></tr><tr><td style=\"text-align:left;\">Cost of Debt</td><td style=\"text-align:left;\">3.49%</td></tr><tr><td style=\"text-align:left;\">Tax Rate</td><td style=\"text-align:left;\">12.76%</td></tr><tr><td style=\"text-align:left;\">10y Treasury</td><td style=\"text-align:left;\">4.80%</td></tr><tr><td style=\"text-align:left;\">Beta</td><td style=\"text-align:left;\">0.89</td></tr><tr><td style=\"text-align:left;\">Market Return</td><td style=\"text-align:left;\">10.50%</td></tr><tr><td style=\"text-align:left;\">Cost of Equity</td><td style=\"text-align:left;\">9.87%</td></tr><tr><td style=\"text-align:left;\">Assumptions Part 2</td><td style=\"text-align:left;\"></td></tr><tr><td style=\"text-align:left;\">CapEx</td><td style=\"text-align:left;\">4,702.10</td></tr><tr><td style=\"text-align:left;\">Capex Margin</td><td style=\"text-align:left;\">3.75%</td></tr><tr><td style=\"text-align:left;\">Net Income</td><td style=\"text-align:left;\">18,168.20</td></tr><tr><td style=\"text-align:left;\">Interest</td><td style=\"text-align:left;\">948.40</td></tr><tr><td style=\"text-align:left;\">Tax</td><td style=\"text-align:left;\">2,656.80</td></tr><tr><td style=\"text-align:left;\">D&amp;A</td><td style=\"text-align:left;\">6,245.60</td></tr><tr><td style=\"text-align:left;\">Ebitda</td><td style=\"text-align:left;\">28,019.00</td></tr><tr><td style=\"text-align:left;\"></td><td style=\"text-align:left;\"></td></tr><tr><td style=\"text-align:left;\">D&amp;A Margin</td><td style=\"text-align:left;\">4.98%</td></tr><tr><td style=\"text-align:left;\">Interest Expense Margin</td><td style=\"text-align:left;\">0.76%</td></tr><tr><td style=\"text-align:left;\">Revenue</td><td style=\"text-align:left;\">125,311.9</td></tr></tbody></table><h3 id=\"id_56021089\">Analysts&#39; Estimates</h3>For FY2023 and FY2024, analysts are anticipating revenues of $133.3 billion and $145.93 billion, respectively. Looking ahead to FY2026-2029, a forward revenue growth rate of 4.87% will be applied.In terms of net income, analysts project an EPS of $8.92, translating to a net income of $22.63 billion for FY2024. For FY2025, the estimate increases to an EPS of $9.75, corresponding to a net income of $24.74 billion. Subsequently, for FY2026-2029, the anticipated 3-5 year long-term expected EPS growth rate of 17.45% will be applied.<table style=\"border-collapse:collapse;\"><colgroup><col/><col/><col/><col/><col/><col/></colgroup><tbody><tr><td style=\"text-align:left;\"></td><td style=\"text-align:left;\">Revenue</td><td style=\"text-align:left;\">Net Income</td><td style=\"text-align:left;\">Plus Taxes</td><td style=\"text-align:left;\">Plus D&amp;A</td><td style=\"text-align:left;\">Plus Interest</td></tr><tr><td style=\"text-align:left;\">2023</td><td style=\"text-align:left;\">$133,310.0</td><td style=\"text-align:left;\">$22,634.50</td><td style=\"text-align:left;\">$25,522.15</td><td style=\"text-align:left;\">$32,104.47</td><td style=\"text-align:left;\">$33,104.00</td></tr><tr><td style=\"text-align:left;\">2024</td><td style=\"text-align:left;\">$145,930.0</td><td style=\"text-align:left;\">$24,740.63</td><td style=\"text-align:left;\">$27,896.97</td><td style=\"text-align:left;\">$34,479.29</td><td style=\"text-align:left;\">$35,478.82</td></tr><tr><td style=\"text-align:left;\">2025</td><td style=\"text-align:left;\">$152,715.7</td><td style=\"text-align:left;\">$29,057.86</td><td style=\"text-align:left;\">$32,764.99</td><td style=\"text-align:left;\">$40,305.48</td><td style=\"text-align:left;\">$41,450.52</td></tr><tr><td style=\"text-align:left;\">2026</td><td style=\"text-align:left;\">$159,817.0</td><td style=\"text-align:left;\">$34,128.46</td><td style=\"text-align:left;\">$38,482.48</td><td style=\"text-align:left;\">$46,373.61</td><td style=\"text-align:left;\">$47,571.88</td></tr><tr><td style=\"text-align:left;\">2027</td><td style=\"text-align:left;\">$167,248.5</td><td style=\"text-align:left;\">$40,083.88</td><td style=\"text-align:left;\">$45,197.68</td><td style=\"text-align:left;\">$53,455.74</td><td style=\"text-align:left;\">$54,709.73</td></tr><tr><td style=\"text-align:left;\">2028</td><td style=\"text-align:left;\">$175,025.6</td><td style=\"text-align:left;\">$47,078.51</td><td style=\"text-align:left;\">$53,084.67</td><td style=\"text-align:left;\">$61,726.73</td><td style=\"text-align:left;\">$63,039.04</td></tr><tr><td style=\"text-align:left;\"></td><td style=\"text-align:left;\"></td><td style=\"text-align:left;\"></td><td style=\"text-align:left;\"></td><td style=\"text-align:left;\"></td><td style=\"text-align:left;\">^Final EBITA^</td></tr></tbody></table><img src=\"https://static.tigerbbs.com/90a2b3d81905562e6d4cd4d6443240d7\" alt=\"Author&#39;s Calculations\" title=\"Author&#39;s Calculations\" tg-width=\"640\" tg-height=\"679\"/>Author&#39;s CalculationsThe initial model suggests that Alibaba is undervalued by a significant margin, approximately 161.9%. According to this model, the fair stock price is estimated to be $204.9, closely aligning with the stock price on July 9, 2021, when the stock traded at $205.94, a period within the onset of the bear market.Additionally, the model indicates a projected future stock price of $274.7. This implies a potential gain of 41.9% until 2028, aligning with Alibaba&#39;s FY2029.<img src=\"https://static.tigerbbs.com/0901371041fe275255a832be806605b0\" alt=\"Seeking Alpha\" title=\"Seeking Alpha\" tg-width=\"640\" tg-height=\"344\"/>Seeking Alpha<h3 id=\"id_3561401362\">My Estimates</h3>In this alternative model, I have projected the growth of each of Alibaba&#39;s segments based on the expected CAGR in their respective markets. The Chinese Retail &amp; Wholesale segments are forecasted to grow at a CAGR of 8.21%, International Retail &amp; Wholesale at 15%, Cainiao in the Platform Delivery market at 5.15%, Chinese cloud at 20.44%, and Chinese Digital Media &amp; Entertainment at a rate of 10.88%. For Local Consumer Services, where estimating revenues is challenging, a conservative growth rate of 5% has been applied, which is notably below the current YoY growth of 16% for this segment.<img src=\"https://static.tigerbbs.com/a0aba12ef54f1700a42b67ae82e18682\" alt=\"Author&#39;s Calculations\" title=\"Author&#39;s Calculations\" tg-width=\"640\" tg-height=\"98\"/>Author&#39;s Calculations<table style=\"border-collapse:collapse;\"><colgroup><col/><col/><col/><col/><col/><col/></colgroup><tbody><tr><td style=\"text-align:left;\"></td><td style=\"text-align:left;\">Revenue</td><td style=\"text-align:left;\">Net Income</td><td style=\"text-align:left;\">Plus Taxes</td><td style=\"text-align:left;\">Plus D&amp;A</td><td style=\"text-align:left;\">Plus Interest</td></tr><tr><td style=\"text-align:left;\">FY 2024</td><td style=\"text-align:left;\">$125,311.9</td><td style=\"text-align:left;\">$18,170.23</td><td style=\"text-align:left;\">$20,488.34</td><td style=\"text-align:left;\">$26,733.94</td><td style=\"text-align:left;\">$27,682.34</td></tr><tr><td style=\"text-align:left;\">FY 2025</td><td style=\"text-align:left;\">$137,322.4</td><td style=\"text-align:left;\">$19,911.75</td><td style=\"text-align:left;\">$22,452.04</td><td style=\"text-align:left;\">$28,697.64</td><td style=\"text-align:left;\">$29,646.04</td></tr><tr><td style=\"text-align:left;\">FY 2026</td><td style=\"text-align:left;\">$150,693.7</td><td style=\"text-align:left;\">$21,850.58</td><td style=\"text-align:left;\">$24,638.23</td><td style=\"text-align:left;\">$32,148.86</td><td style=\"text-align:left;\">$33,289.36</td></tr><tr><td style=\"text-align:left;\">FY 2027</td><td style=\"text-align:left;\">$165,610.7</td><td style=\"text-align:left;\">$24,013.55</td><td style=\"text-align:left;\">$27,077.14</td><td style=\"text-align:left;\">$35,331.25</td><td style=\"text-align:left;\">$36,584.65</td></tr><tr><td style=\"text-align:left;\">FY 2028</td><td style=\"text-align:left;\">$182,287.9</td><td style=\"text-align:left;\">$26,431.75</td><td style=\"text-align:left;\">$29,803.84</td><td style=\"text-align:left;\">$38,889.16</td><td style=\"text-align:left;\">$40,268.77</td></tr><tr><td style=\"text-align:left;\">FY 2029</td><td style=\"text-align:left;\">$200,974.3</td><td style=\"text-align:left;\">$29,141.27</td><td style=\"text-align:left;\">$32,859.04</td><td style=\"text-align:left;\">$42,875.69</td><td style=\"text-align:left;\">$44,396.73</td></tr><tr><td style=\"text-align:left;\"></td><td style=\"text-align:left;\"></td><td style=\"text-align:left;\"></td><td style=\"text-align:left;\"></td><td style=\"text-align:left;\"></td><td style=\"text-align:left;\">^Final EBITA^</td></tr></tbody></table>Author&#39;s CalculationsThis more conservative model suggests a fair price of $148.1, indicating an upside of 89.3% from the current stock price of $78.2. Looking ahead to FY2029, the projected stock price is $184.2, translating into annual returns of 22.6%. While not as high as the previous model, these returns are still substantial and attractive.<h2 id=\"id_3686040600\">Risks to Thesis</h2>The primary risk factor in this bullish thesis revolves around the influence exerted by the Chinese Government. The government&#39;s control over corporations, as evidenced by the halt in the Ant Group&#39;s IPO in Hong Kong, poses a considerable risk. If there were a concerted effort to sideline Jack Ma, a key figure in the company&#39;s direction, it could deliver a significant intellectual blow to Alibaba. In such a scenario, the company would need to secure an equally capable protector, given Ma&#39;s influential role despite not holding the CEO position.Secondly, there exists the risk of a severe Chinese recession impacting Alibaba&#39;s sales volume. With over 65% of e-commerce revenues hinging on the Chinese market, the company is vulnerable to economic downturns. This vulnerability extends beyond e-commerce to include entertainment platforms and Cainiao, which is intricately tied to e-commerce operations.Lastly, there is the risk of a foreign competitor, such as Amazon.com, Inc. (AMZN), succeeding in growing aggressively within the Chinese market. Alibaba&#39;s lack of logistical infrastructure in the US to counterbalance Amazon&#39;s influence could position the company unfavorably in the long term. To mitigate this risk, Alibaba would need to consider strategic expansion into other markets.<h2 id=\"id_2850560331\">Conclusion</h2>In conclusion, Alibaba Group Holdings Limited emerges as a compelling investment opportunity marked by a resilient business model and diversified revenue streams. Despite recent challenges and regulatory uncertainties, the company&#39;s strategic segments, including e-commerce, cloud, and logistics, showcase robust growth potential domestically and internationally.Throughout two DCF models, we observe that Alibaba&#39;s undervaluation could be as high as 161.9% considering analysts&#39; estimates. However, to make it more conservative, I conducted my own estimates which suggest that Alibaba is undervalued by 89.3%. After conducting the two models, I am assigning Alibaba a stock price target of $148.1, which is an 89.3% upside from the current stock price of $78.2. Furthermore, the stock could reach a price of $184.2 in FY 2029 (year 2028), which translates into 22.4% annual returns.The undervaluation indicators, coupled with the recent stock pullback, suggest this is an attractive entry point for Alibaba Group Holding Limited stock, but investors must remain vigilant to risks associated with governmental influence, economic downturns, and foreign competition. Alibaba&#39;s adeptness in navigating these challenges, coupled with its financial strength and strategic positioning, positions it favorably for long-term growth.Editor&#39;s Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.</body></html>","source":"seekingalpha","collect":0,"html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Alibaba Is Hugely Undervalued?</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nAlibaba Is Hugely Undervalued?\n</h2>\n\n<h4 class=\"meta\">\n\n\n2023-11-23 15:00 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4653737-alibaba-is-hugely-undervalued>Seeking Alpha</a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\nAlibaba Group Holding Limited offers a compelling investment opportunity with a diversified portfolio spanning e-commerce, cloud services, logistics, and digital media, providing resilience in a ...\n\n<a href=\"https://seekingalpha.com/article/4653737-alibaba-is-hugely-undervalued\">Web Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","type":0,"thumbnail":"","relate_stocks":{"LU0053666078.USD":"摩根大通基金-美国股票A（离岸）美元","IE00B19Z9505.USD":"美盛-美国大盘成长股A Acc","LU0079474960.USD":"联博美国增长基金A","BK4559":"巴菲特持仓","BK4538":"云计算","LU0082616367.USD":"摩根大通美国科技A（dist）","GB00BDT5M118.USD":"天利环球扩展Alpha基金A Acc","09988":"阿里巴巴-W","IE0004445239.USD":"JANUS HENDERSON US FORTY \"A2\" (USD) ACC","BK4550":"红杉资本持仓","LU0061474960.USD":"天利环球焦点基金AU Acc","LU0353189680.USD":"富国美国全盘成长基金Cl A Acc","BK4122":"互联网与直销零售","LU0072913022.USD":"UBS (LUX) EQUITY FUND - 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Additionally, the company abandoned its plans to spin off its cloud business, citing uncertainties in the growth trajectory caused by the U.S.-imposed restrictions on AI chip imports.Nevertheless, in this article, I will elucidate using two valuation models why Alibaba is significantly undervalued, marking an undervaluation of up to 80%. This substantial undervaluation provides a considerable margin of security for investors, warranting a \"strong buy\" recommendation. I propose a fair price of $148.1 for the stock.OverviewFQ2 2024 AlibabaFY 2023Q2 2024 EarningsIn FQ2 2024, Alibaba outperformed expectations in earnings but fell short on revenue, with a notable miss of $230 million. Despite this, the company reported an impressive EPS of $2.14, surpassing the consensus by $0.05.The most significant blow to these earnings results came as Alibaba opted to abandon its plan to spin off its cloud business. The rationale behind this decision was a belief that the spin-off would not deliver the anticipated shareholder value. Furthermore, the company pointed to the current export restrictions on AI chips imposed by the U.S., which has cast uncertainty over the prospects of its cloud segment.Adding to the challenges, Alibaba disclosed that Jack Ma's family trust intends to sell 10 million shares valued at $870.71 million on November 21.MarketE-Commerce ChinaAlibaba's primary focus lies in e-commerce, as illustrated in the table below, with a significant dependency on China, representing 67% of this segment. However, since 2021, Alibaba has successfully reduced its reliance on the Chinese market by 3%.In addition to its Chinese and international e-commerce segments, Alibaba operates in the \"wholesale\" segment. This facet involves collaboration with Chinese factories, functioning in a producer-to-consumer model. Notably, the cost per unit decreases with higher purchase quantities.Projections indicate an anticipated growth rate of 8.21% for the Chinese e-commerce market throughout 2027. In contrast, the global e-commerce market is expected to experience a more robust growth rate of approximately 15% by 2032.StatistaPrecedence ResearchLocal Consumer ServicesThe Local Consumer Services segment of Alibaba encompasses a range of diverse services designed to cater to various consumer needs. Among these services are Ele.me, a prominent on-demand delivery platform, Amap, providing digital mapping services along with real-time traffic information, Fliggy, an online travel platform, and Taoxianda, a platform aiding retailers in establishing and managing online stores.Cainiao - Platform Delivery ChinaCainiao, a company 70% owned by Alibaba following its acquisition of the majority stake in 2017, specializes in logistics. Serving as a crucial complement to Alibaba's e-commerce operations in China, Cainiao plays a pivotal role in ensuring timely deliveries within China, often achieving the impressive feat of completing deliveries in less than 24 hours.Notably, the platform delivery segment has experienced recent growth, propelled by the surge in e-commerce sales. Projections indicate a continued growth rate of 5.15% for this market throughout 2027.Author's Calculations with base on StatistaCloud - ChinaAlibaba also boasts a formidable presence in the cloud segment, initially slated for a significant spinoff as part of a major strategic plan. This move garnered widespread acclaim from investors, given the robust prospects of the cloud market in China. Projections estimate a noteworthy growth rate of 20.44%, and the autonomy of an independent Alibaba Cloud company is anticipated to drive rapid revenue expansion and robust cash-flow growth, particularly considering the high profitability associated with cloud services.Notably, the projected growth rate of 20.44% for the Chinese cloud market closely aligns with the impressive revenue growth that Alibaba has consistently demonstrated within its cloud segment.Author's Calculations with base on StatistaDigital Media & Entertainment - ChinaThe final segment in Alibaba's diverse portfolio is Digital Media and Entertainment, featuring key components such as Youku, a prominent video platform, and Alibaba Pictures, which encompasses intellectual property, licensing, and cinema ticketing management for the movie industry. Additionally, the company provides other content platforms and engages in the online gaming sector.Projections for the digital media market in China are optimistic, with an expected growth rate of 10.88%. This growth is anticipated to be fueled by the increasing revenue per user, projected to experience a substantial uptick of 7.6% from 2023 to 2027.StatistaStatistaFinancialAlibaba has demonstrated remarkable revenue growth over the past six years. Since FY2018, the company has achieved an annual revenue growth rate of 35.68%. However, in a recent development, Alibaba experienced its first decline in revenue, with a year-over-year reduction of 5.97%.What stands out is the company's ability to consistently grow its net income, a crucial factor influencing a discounted cash flow (\"DCF\") model. The net income has grown at a commendable annual rate of 15.57%, currently standing at $18.16 billion, though below the 2021 all-time high of $22.98 billion.In terms of margins, a noticeable downward trend is observed in both operating margin and net income margin. In FY2018, these metrics were above 25%, with the operating margin at 28.21% and the net income margin at 25.61%. As of the latest earnings release, both metrics have decreased to 14.66% and 14.50%, respectively.Author's CalculationsAuthor's CalculationsAlibaba's financial foundation appears robust, with a substantial cash reserve of $78.66 billion and a comparatively low debt burden. Long-term debt stands at $21.71 billion, while short-term debt is at $5.4 billion.Author's CalculationsDespite the overall positive financial outlook, Alibaba's free cash flow has experienced annual growth of 9.38%. The free cash flow margin, however, has seen a significant decrease from FY2018's 36.6% to the current level of 18.2%. This indicates a potential decrease in efficiency, and Alibaba attributes this shift to the presence of project-based contracts, which inherently have lower margins. The company is actively working to reduce the impact of these contracts to enhance overall margins.Author's CalculationsAuthor's CalculationsAuthor's CalculationsValuationIn this valuation of Alibaba, I will employ two distinct models: the first relies on analysts' estimates for revenue and net income, while the second model involves my own estimates formulated from scratch. These estimates are based on the anticipated growth rates within the markets of each of Alibaba's operating segments.The table below outlines the assumptions integral to calculating Alibaba's fair stock price. Notably, D&A, interest expenses, and CapEx will be computed using margins tied to revenue.Ultimately, the WACC will be derived from variables such as equity value, debt value, and the cost of debt, utilizing the widely recognized formula.For FY2023 and FY2024, analysts anticipate revenues of $133.3 billion and $145.93 billion, respectively. Subsequently, for FY2026-2029, I will apply an expected forward revenue growth rate of 4.87%.TABLE OF ASSUMPTIONS(Current data)Assumptions Part 1Equity Value141,772.60Debt Value27,182.30Cost of Debt3.49%Tax Rate12.76%10y Treasury4.80%Beta0.89Market Return10.50%Cost of Equity9.87%Assumptions Part 2CapEx4,702.10Capex Margin3.75%Net Income18,168.20Interest948.40Tax2,656.80D&A6,245.60Ebitda28,019.00D&A Margin4.98%Interest Expense Margin0.76%Revenue125,311.9Analysts' EstimatesFor FY2023 and FY2024, analysts are anticipating revenues of $133.3 billion and $145.93 billion, respectively. Looking ahead to FY2026-2029, a forward revenue growth rate of 4.87% will be applied.In terms of net income, analysts project an EPS of $8.92, translating to a net income of $22.63 billion for FY2024. For FY2025, the estimate increases to an EPS of $9.75, corresponding to a net income of $24.74 billion. Subsequently, for FY2026-2029, the anticipated 3-5 year long-term expected EPS growth rate of 17.45% will be applied.RevenueNet IncomePlus TaxesPlus D&APlus Interest2023$133,310.0$22,634.50$25,522.15$32,104.47$33,104.002024$145,930.0$24,740.63$27,896.97$34,479.29$35,478.822025$152,715.7$29,057.86$32,764.99$40,305.48$41,450.522026$159,817.0$34,128.46$38,482.48$46,373.61$47,571.882027$167,248.5$40,083.88$45,197.68$53,455.74$54,709.732028$175,025.6$47,078.51$53,084.67$61,726.73$63,039.04^Final EBITA^Author's CalculationsThe initial model suggests that Alibaba is undervalued by a significant margin, approximately 161.9%. According to this model, the fair stock price is estimated to be $204.9, closely aligning with the stock price on July 9, 2021, when the stock traded at $205.94, a period within the onset of the bear market.Additionally, the model indicates a projected future stock price of $274.7. This implies a potential gain of 41.9% until 2028, aligning with Alibaba's FY2029.Seeking AlphaMy EstimatesIn this alternative model, I have projected the growth of each of Alibaba's segments based on the expected CAGR in their respective markets. The Chinese Retail & Wholesale segments are forecasted to grow at a CAGR of 8.21%, International Retail & Wholesale at 15%, Cainiao in the Platform Delivery market at 5.15%, Chinese cloud at 20.44%, and Chinese Digital Media & Entertainment at a rate of 10.88%. For Local Consumer Services, where estimating revenues is challenging, a conservative growth rate of 5% has been applied, which is notably below the current YoY growth of 16% for this segment.Author's CalculationsRevenueNet IncomePlus TaxesPlus D&APlus InterestFY 2024$125,311.9$18,170.23$20,488.34$26,733.94$27,682.34FY 2025$137,322.4$19,911.75$22,452.04$28,697.64$29,646.04FY 2026$150,693.7$21,850.58$24,638.23$32,148.86$33,289.36FY 2027$165,610.7$24,013.55$27,077.14$35,331.25$36,584.65FY 2028$182,287.9$26,431.75$29,803.84$38,889.16$40,268.77FY 2029$200,974.3$29,141.27$32,859.04$42,875.69$44,396.73^Final EBITA^Author's CalculationsThis more conservative model suggests a fair price of $148.1, indicating an upside of 89.3% from the current stock price of $78.2. Looking ahead to FY2029, the projected stock price is $184.2, translating into annual returns of 22.6%. While not as high as the previous model, these returns are still substantial and attractive.Risks to ThesisThe primary risk factor in this bullish thesis revolves around the influence exerted by the Chinese Government. The government's control over corporations, as evidenced by the halt in the Ant Group's IPO in Hong Kong, poses a considerable risk. If there were a concerted effort to sideline Jack Ma, a key figure in the company's direction, it could deliver a significant intellectual blow to Alibaba. In such a scenario, the company would need to secure an equally capable protector, given Ma's influential role despite not holding the CEO position.Secondly, there exists the risk of a severe Chinese recession impacting Alibaba's sales volume. With over 65% of e-commerce revenues hinging on the Chinese market, the company is vulnerable to economic downturns. This vulnerability extends beyond e-commerce to include entertainment platforms and Cainiao, which is intricately tied to e-commerce operations.Lastly, there is the risk of a foreign competitor, such as Amazon.com, Inc. (AMZN), succeeding in growing aggressively within the Chinese market. Alibaba's lack of logistical infrastructure in the US to counterbalance Amazon's influence could position the company unfavorably in the long term. To mitigate this risk, Alibaba would need to consider strategic expansion into other markets.ConclusionIn conclusion, Alibaba Group Holdings Limited emerges as a compelling investment opportunity marked by a resilient business model and diversified revenue streams. Despite recent challenges and regulatory uncertainties, the company's strategic segments, including e-commerce, cloud, and logistics, showcase robust growth potential domestically and internationally.Throughout two DCF models, we observe that Alibaba's undervaluation could be as high as 161.9% considering analysts' estimates. However, to make it more conservative, I conducted my own estimates which suggest that Alibaba is undervalued by 89.3%. After conducting the two models, I am assigning Alibaba a stock price target of $148.1, which is an 89.3% upside from the current stock price of $78.2. Furthermore, the stock could reach a price of $184.2 in FY 2029 (year 2028), which translates into 22.4% annual returns.The undervaluation indicators, coupled with the recent stock pullback, suggest this is an attractive entry point for Alibaba Group Holding Limited stock, but investors must remain vigilant to risks associated with governmental influence, economic downturns, and foreign competition. Alibaba's adeptness in navigating these challenges, coupled with its financial strength and strategic positioning, positions it favorably for long-term growth.Editor's Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.","news_type":1},"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":244498521649216,"gmtCreate":1700716062691,"gmtModify":1700716066894,"author":{"id":"3585091471152160","authorId":"3585091471152160","name":"HzxS","avatar":"https://community-static.tradeup.com/news/def522cb7b738597b941a2939e4fbbe7","vip":1,"hat":"https://static.tigerbbs.com/0a8758340a08196056f8bc1e54805193","crmLevel":6,"crmLevelSwitch":0,"idStr":"3585091471152160","authorIdStr":"3585091471152160"},"htmlText":"Nice 👍🏻🍻","listText":"Nice 👍🏻🍻","text":"Nice 👍🏻🍻","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":1,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/244498521649216","repostId":2385466779,"repostType":2,"repost":{"id":"2385466779","pubTimestamp":1700722800,"share":"https://ttm.financial/m/news/2385466779?lang=&edition=fundamental","pubTime":"2023-11-23 15:00","market":"us","language":"en","title":"Alibaba Is Hugely Undervalued?","url":"https://stock-news.laohu8.com/highlight/detail?id=2385466779","media":"Seeking Alpha","summary":"Alibaba Group Holding Limited offers a compelling investment opportunity with a diversified portfolio spanning e-commerce, cloud services, logistics, and digital media, providing resilience in a dynam","content":"<html><head></head><body><ul style=\"\"><li>Alibaba Group Holding Limited offers a compelling investment opportunity with a diversified portfolio spanning e-commerce, cloud services, logistics, and digital media, providing resilience in a dynamic market.</li><li>Despite recent challenges and regulatory uncertainties, Alibaba&#39;s strategic segments, both domestically and internationally, showcase robust growth potential, emphasizing the company&#39;s adaptability and innovation.</li><li>The recent stock pullback, coupled with an undervaluation that could be as high as 161.9%, presents an attractive entry point for investors looking to capitalize on Alibaba&#39;s long-term growth prospects.</li><li>Investors must remain vigilant to potential risks, including governmental influence, economic downturns, and competition from foreign players, acknowledging the nuanced balance between Alibaba&#39;s strengths and external factors.</li><li>Alibaba&#39;s solid financial foundation, diversified revenue streams, and strategic positioning position it favorably for long-term growth, making it a promising investment choice.</li></ul><img src=\"https://static.tigerbbs.com/84b6aeab08dc480ef3a214462aadfcfd\" title=\"Robert Way\" tg-width=\"750\" tg-height=\"500\"/>Robert Way<h2 id=\"id_522885472\">Thesis</h2>After the release of FQ2 2024, Alibaba Group Holding Limited (NYSE:BABA) experienced a 10% decline as the company fell short of revenue expectations by $250 million, despite EPS estimates. Additionally, the company abandoned its plans to spin off its cloud business, citing uncertainties in the growth trajectory caused by the U.S.-imposed restrictions on AI chip imports.Nevertheless, in this article, I will elucidate using two valuation models why Alibaba is significantly undervalued, marking an undervaluation of up to 80%. This substantial undervaluation provides a considerable margin of security for investors, warranting a &#34;strong buy&#34; recommendation. I propose a fair price of $148.1 for the stock.<h2 id=\"id_1987249582\">Overview</h2><img src=\"https://static.tigerbbs.com/081c2dd239fb542c7136a40c1b6c2ad1\" alt=\"FQ2 2024 Alibaba\" title=\"FQ2 2024 Alibaba\" tg-width=\"640\" tg-height=\"133\"/>FQ2 2024 Alibaba<img src=\"https://static.tigerbbs.com/e6bb4b66323db07420db79ea50a4c420\" alt=\"FY 2023\" title=\"FY 2023\" tg-width=\"640\" tg-height=\"417\"/>FY 2023<h3 id=\"id_3914187007\">Q2 2024 Earnings</h3>In FQ2 2024, Alibaba outperformed expectations in earnings but fell short on revenue, with a notable miss of $230 million. Despite this, the company reported an impressive EPS of $2.14, surpassing the consensus by $0.05.The most significant blow to these earnings results came as Alibaba opted to abandon its plan to spin off its cloud business. The rationale behind this decision was a belief that the spin-off would not deliver the anticipated shareholder value. Furthermore, the company pointed to the current export restrictions on AI chips imposed by the U.S., which has cast uncertainty over the prospects of its cloud segment.Adding to the challenges, Alibaba disclosed that Jack Ma&#39;s family trust intends to sell 10 million shares valued at $870.71 million on November 21.<h3 id=\"id_2851468396\">Market</h3><h4 id=\"id_4264278908\">E-Commerce China</h4>Alibaba&#39;s primary focus lies in e-commerce, as illustrated in the table below, with a significant dependency on China, representing 67% of this segment. However, since 2021, Alibaba has successfully reduced its reliance on the Chinese market by 3%.In addition to its Chinese and international e-commerce segments, Alibaba operates in the &#34;wholesale&#34; segment. This facet involves collaboration with Chinese factories, functioning in a producer-to-consumer model. Notably, the cost per unit decreases with higher purchase quantities.Projections indicate an anticipated growth rate of 8.21% for the Chinese e-commerce market throughout 2027. In contrast, the global e-commerce market is expected to experience a more robust growth rate of approximately 15% by 2032.<img src=\"https://static.tigerbbs.com/cb5ffc078e262abf6dae01b3008e5789\" alt=\"Statista\" title=\"Statista\" tg-width=\"640\" tg-height=\"340\"/>Statista<img src=\"https://static.tigerbbs.com/fa869592dad3d103e32094e603a07313\" alt=\"Precedence Research\" title=\"Precedence Research\" tg-width=\"1000\" tg-height=\"592\"/>Precedence Research<h4 id=\"id_21983917\">Local Consumer Services</h4>The Local Consumer Services segment of Alibaba encompasses a range of diverse services designed to cater to various consumer needs. Among these services are Ele.me, a prominent on-demand delivery platform, Amap, providing digital mapping services along with real-time traffic information, Fliggy, an online travel platform, and Taoxianda, a platform aiding retailers in establishing and managing online stores.<h4 id=\"id_2699114686\">Cainiao - Platform Delivery China</h4>Cainiao, a company 70% owned by Alibaba following its acquisition of the majority stake in 2017, specializes in logistics. Serving as a crucial complement to Alibaba&#39;s e-commerce operations in China, Cainiao plays a pivotal role in ensuring timely deliveries within China, often achieving the impressive feat of completing deliveries in less than 24 hours.Notably, the platform delivery segment has experienced recent growth, propelled by the surge in e-commerce sales. Projections indicate a continued growth rate of 5.15% for this market throughout 2027.<img src=\"https://static.tigerbbs.com/bd03ba9b4a58c40599efe510d0bd95e0\" alt=\"Author&#39;s Calculations with base on Statista\" title=\"Author&#39;s Calculations with base on Statista\" tg-width=\"640\" tg-height=\"385\"/>Author&#39;s Calculations with base on Statista<h4 id=\"id_2806472205\">Cloud - China</h4>Alibaba also boasts a formidable presence in the cloud segment, initially slated for a significant spinoff as part of a major strategic plan. This move garnered widespread acclaim from investors, given the robust prospects of the cloud market in China. Projections estimate a noteworthy growth rate of 20.44%, and the autonomy of an independent Alibaba Cloud company is anticipated to drive rapid revenue expansion and robust cash-flow growth, particularly considering the high profitability associated with cloud services.Notably, the projected growth rate of 20.44% for the Chinese cloud market closely aligns with the impressive revenue growth that Alibaba has consistently demonstrated within its cloud segment.<img src=\"https://static.tigerbbs.com/2c83a9ff7534361801c44c57f6842844\" alt=\"Author&#39;s Calculations with base on Statista\" title=\"Author&#39;s Calculations with base on Statista\" tg-width=\"640\" tg-height=\"385\"/>Author&#39;s Calculations with base on Statista<h4 id=\"id_1524553402\">Digital Media &amp; Entertainment - China</h4>The final segment in Alibaba&#39;s diverse portfolio is Digital Media and Entertainment, featuring key components such as Youku, a prominent video platform, and Alibaba Pictures, which encompasses intellectual property, licensing, and cinema ticketing management for the movie industry. Additionally, the company provides other content platforms and engages in the online gaming sector.Projections for the digital media market in China are optimistic, with an expected growth rate of 10.88%. This growth is anticipated to be fueled by the increasing revenue per user, projected to experience a substantial uptick of 7.6% from 2023 to 2027.<img src=\"https://static.tigerbbs.com/68b6148617c06e49a88276236a24288e\" alt=\"Statista\" title=\"Statista\" tg-width=\"640\" tg-height=\"402\"/>Statista<img src=\"https://static.tigerbbs.com/d15ed857ad6619ed880668554372e704\" alt=\"Statista\" title=\"Statista\" tg-width=\"640\" tg-height=\"378\"/>Statista<h2 id=\"id_3984174781\">Financial</h2>Alibaba has demonstrated remarkable revenue growth over the past six years. Since FY2018, the company has achieved an annual revenue growth rate of 35.68%. However, in a recent development, Alibaba experienced its first decline in revenue, with a year-over-year reduction of 5.97%.What stands out is the company&#39;s ability to consistently grow its net income, a crucial factor influencing a discounted cash flow (&#34;DCF&#34;) model. The net income has grown at a commendable annual rate of 15.57%, currently standing at $18.16 billion, though below the 2021 all-time high of $22.98 billion.In terms of margins, a noticeable downward trend is observed in both operating margin and net income margin. In FY2018, these metrics were above 25%, with the operating margin at 28.21% and the net income margin at 25.61%. As of the latest earnings release, both metrics have decreased to 14.66% and 14.50%, respectively.<img src=\"https://static.tigerbbs.com/960c6966b32c3d6338927f89928133eb\" alt=\"Author&#39;s Calculations\" title=\"Author&#39;s Calculations\" tg-width=\"640\" tg-height=\"384\"/>Author&#39;s Calculations<img src=\"https://static.tigerbbs.com/c879d4d20ebba8a4b090bf207e7fdaa6\" alt=\"Author&#39;s Calculations\" title=\"Author&#39;s Calculations\" tg-width=\"640\" tg-height=\"389\"/>Author&#39;s CalculationsAlibaba&#39;s financial foundation appears robust, with a substantial cash reserve of $78.66 billion and a comparatively low debt burden. Long-term debt stands at $21.71 billion, while short-term debt is at $5.4 billion.<img src=\"https://static.tigerbbs.com/29d34db56f2ac763355ca3f8ce4693ef\" alt=\"Author&#39;s Calculations\" title=\"Author&#39;s Calculations\" tg-width=\"640\" tg-height=\"391\"/>Author&#39;s CalculationsDespite the overall positive financial outlook, Alibaba&#39;s free cash flow has experienced annual growth of 9.38%. The free cash flow margin, however, has seen a significant decrease from FY2018&#39;s 36.6% to the current level of 18.2%. This indicates a potential decrease in efficiency, and Alibaba attributes this shift to the presence of project-based contracts, which inherently have lower margins. The company is actively working to reduce the impact of these contracts to enhance overall margins.<img src=\"https://static.tigerbbs.com/bd64025d13a547be8d4e59fe5383e405\" alt=\"Author&#39;s Calculations\" title=\"Author&#39;s Calculations\" tg-width=\"640\" tg-height=\"461\"/>Author&#39;s Calculations<img src=\"https://static.tigerbbs.com/b5ab121ecbf172e600e9baf213607a57\" alt=\"Author&#39;s Calculations\" title=\"Author&#39;s Calculations\" tg-width=\"640\" tg-height=\"476\"/>Author&#39;s Calculations<img src=\"https://static.tigerbbs.com/1e791c46f8ca163f7aa30e11f9d6c939\" alt=\"Author&#39;s Calculations\" title=\"Author&#39;s Calculations\" tg-width=\"640\" tg-height=\"358\"/>Author&#39;s Calculations<h2 id=\"id_3734509088\">Valuation</h2>In this valuation of Alibaba, I will employ two distinct models: the first relies on analysts&#39; estimates for revenue and net income, while the second model involves my own estimates formulated from scratch. These estimates are based on the anticipated growth rates within the markets of each of Alibaba&#39;s operating segments.The table below outlines the assumptions integral to calculating Alibaba&#39;s fair stock price. Notably, D&amp;A, interest expenses, and CapEx will be computed using margins tied to revenue.Ultimately, the WACC will be derived from variables such as equity value, debt value, and the cost of debt, utilizing the widely recognized formula.For FY2023 and FY2024, analysts anticipate revenues of $133.3 billion and $145.93 billion, respectively. Subsequently, for FY2026-2029, I will apply an expected forward revenue growth rate of 4.87%.<table style=\"border-collapse:collapse;\"><colgroup><col/><col/></colgroup><tbody><tr><td colspan=\"2\" style=\"text-align:left;\">TABLE OF ASSUMPTIONS</td></tr><tr><td style=\"text-align:left;\">(Current data)</td><td style=\"text-align:left;\"></td></tr><tr><td style=\"text-align:left;\">Assumptions Part 1</td><td style=\"text-align:left;\"></td></tr><tr><td style=\"text-align:left;\"></td><td style=\"text-align:left;\"></td></tr><tr><td style=\"text-align:left;\">Equity Value</td><td style=\"text-align:left;\">141,772.60</td></tr><tr><td style=\"text-align:left;\">Debt Value</td><td style=\"text-align:left;\">27,182.30</td></tr><tr><td style=\"text-align:left;\">Cost of Debt</td><td style=\"text-align:left;\">3.49%</td></tr><tr><td style=\"text-align:left;\">Tax Rate</td><td style=\"text-align:left;\">12.76%</td></tr><tr><td style=\"text-align:left;\">10y Treasury</td><td style=\"text-align:left;\">4.80%</td></tr><tr><td style=\"text-align:left;\">Beta</td><td style=\"text-align:left;\">0.89</td></tr><tr><td style=\"text-align:left;\">Market Return</td><td style=\"text-align:left;\">10.50%</td></tr><tr><td style=\"text-align:left;\">Cost of Equity</td><td style=\"text-align:left;\">9.87%</td></tr><tr><td style=\"text-align:left;\">Assumptions Part 2</td><td style=\"text-align:left;\"></td></tr><tr><td style=\"text-align:left;\">CapEx</td><td style=\"text-align:left;\">4,702.10</td></tr><tr><td style=\"text-align:left;\">Capex Margin</td><td style=\"text-align:left;\">3.75%</td></tr><tr><td style=\"text-align:left;\">Net Income</td><td style=\"text-align:left;\">18,168.20</td></tr><tr><td style=\"text-align:left;\">Interest</td><td style=\"text-align:left;\">948.40</td></tr><tr><td style=\"text-align:left;\">Tax</td><td style=\"text-align:left;\">2,656.80</td></tr><tr><td style=\"text-align:left;\">D&amp;A</td><td style=\"text-align:left;\">6,245.60</td></tr><tr><td style=\"text-align:left;\">Ebitda</td><td style=\"text-align:left;\">28,019.00</td></tr><tr><td style=\"text-align:left;\"></td><td style=\"text-align:left;\"></td></tr><tr><td style=\"text-align:left;\">D&amp;A Margin</td><td style=\"text-align:left;\">4.98%</td></tr><tr><td style=\"text-align:left;\">Interest Expense Margin</td><td style=\"text-align:left;\">0.76%</td></tr><tr><td style=\"text-align:left;\">Revenue</td><td style=\"text-align:left;\">125,311.9</td></tr></tbody></table><h3 id=\"id_56021089\">Analysts&#39; Estimates</h3>For FY2023 and FY2024, analysts are anticipating revenues of $133.3 billion and $145.93 billion, respectively. Looking ahead to FY2026-2029, a forward revenue growth rate of 4.87% will be applied.In terms of net income, analysts project an EPS of $8.92, translating to a net income of $22.63 billion for FY2024. For FY2025, the estimate increases to an EPS of $9.75, corresponding to a net income of $24.74 billion. Subsequently, for FY2026-2029, the anticipated 3-5 year long-term expected EPS growth rate of 17.45% will be applied.<table style=\"border-collapse:collapse;\"><colgroup><col/><col/><col/><col/><col/><col/></colgroup><tbody><tr><td style=\"text-align:left;\"></td><td style=\"text-align:left;\">Revenue</td><td style=\"text-align:left;\">Net Income</td><td style=\"text-align:left;\">Plus Taxes</td><td style=\"text-align:left;\">Plus D&amp;A</td><td style=\"text-align:left;\">Plus Interest</td></tr><tr><td style=\"text-align:left;\">2023</td><td style=\"text-align:left;\">$133,310.0</td><td style=\"text-align:left;\">$22,634.50</td><td style=\"text-align:left;\">$25,522.15</td><td style=\"text-align:left;\">$32,104.47</td><td style=\"text-align:left;\">$33,104.00</td></tr><tr><td style=\"text-align:left;\">2024</td><td style=\"text-align:left;\">$145,930.0</td><td style=\"text-align:left;\">$24,740.63</td><td style=\"text-align:left;\">$27,896.97</td><td style=\"text-align:left;\">$34,479.29</td><td style=\"text-align:left;\">$35,478.82</td></tr><tr><td style=\"text-align:left;\">2025</td><td style=\"text-align:left;\">$152,715.7</td><td style=\"text-align:left;\">$29,057.86</td><td style=\"text-align:left;\">$32,764.99</td><td style=\"text-align:left;\">$40,305.48</td><td style=\"text-align:left;\">$41,450.52</td></tr><tr><td style=\"text-align:left;\">2026</td><td style=\"text-align:left;\">$159,817.0</td><td style=\"text-align:left;\">$34,128.46</td><td style=\"text-align:left;\">$38,482.48</td><td style=\"text-align:left;\">$46,373.61</td><td style=\"text-align:left;\">$47,571.88</td></tr><tr><td style=\"text-align:left;\">2027</td><td style=\"text-align:left;\">$167,248.5</td><td style=\"text-align:left;\">$40,083.88</td><td style=\"text-align:left;\">$45,197.68</td><td style=\"text-align:left;\">$53,455.74</td><td style=\"text-align:left;\">$54,709.73</td></tr><tr><td style=\"text-align:left;\">2028</td><td style=\"text-align:left;\">$175,025.6</td><td style=\"text-align:left;\">$47,078.51</td><td style=\"text-align:left;\">$53,084.67</td><td style=\"text-align:left;\">$61,726.73</td><td style=\"text-align:left;\">$63,039.04</td></tr><tr><td style=\"text-align:left;\"></td><td style=\"text-align:left;\"></td><td style=\"text-align:left;\"></td><td style=\"text-align:left;\"></td><td style=\"text-align:left;\"></td><td style=\"text-align:left;\">^Final EBITA^</td></tr></tbody></table><img src=\"https://static.tigerbbs.com/90a2b3d81905562e6d4cd4d6443240d7\" alt=\"Author&#39;s Calculations\" title=\"Author&#39;s Calculations\" tg-width=\"640\" tg-height=\"679\"/>Author&#39;s CalculationsThe initial model suggests that Alibaba is undervalued by a significant margin, approximately 161.9%. According to this model, the fair stock price is estimated to be $204.9, closely aligning with the stock price on July 9, 2021, when the stock traded at $205.94, a period within the onset of the bear market.Additionally, the model indicates a projected future stock price of $274.7. This implies a potential gain of 41.9% until 2028, aligning with Alibaba&#39;s FY2029.<img src=\"https://static.tigerbbs.com/0901371041fe275255a832be806605b0\" alt=\"Seeking Alpha\" title=\"Seeking Alpha\" tg-width=\"640\" tg-height=\"344\"/>Seeking Alpha<h3 id=\"id_3561401362\">My Estimates</h3>In this alternative model, I have projected the growth of each of Alibaba&#39;s segments based on the expected CAGR in their respective markets. The Chinese Retail &amp; Wholesale segments are forecasted to grow at a CAGR of 8.21%, International Retail &amp; Wholesale at 15%, Cainiao in the Platform Delivery market at 5.15%, Chinese cloud at 20.44%, and Chinese Digital Media &amp; Entertainment at a rate of 10.88%. For Local Consumer Services, where estimating revenues is challenging, a conservative growth rate of 5% has been applied, which is notably below the current YoY growth of 16% for this segment.<img src=\"https://static.tigerbbs.com/a0aba12ef54f1700a42b67ae82e18682\" alt=\"Author&#39;s Calculations\" title=\"Author&#39;s Calculations\" tg-width=\"640\" tg-height=\"98\"/>Author&#39;s Calculations<table style=\"border-collapse:collapse;\"><colgroup><col/><col/><col/><col/><col/><col/></colgroup><tbody><tr><td style=\"text-align:left;\"></td><td style=\"text-align:left;\">Revenue</td><td style=\"text-align:left;\">Net Income</td><td style=\"text-align:left;\">Plus Taxes</td><td style=\"text-align:left;\">Plus D&amp;A</td><td style=\"text-align:left;\">Plus Interest</td></tr><tr><td style=\"text-align:left;\">FY 2024</td><td style=\"text-align:left;\">$125,311.9</td><td style=\"text-align:left;\">$18,170.23</td><td style=\"text-align:left;\">$20,488.34</td><td style=\"text-align:left;\">$26,733.94</td><td style=\"text-align:left;\">$27,682.34</td></tr><tr><td style=\"text-align:left;\">FY 2025</td><td style=\"text-align:left;\">$137,322.4</td><td style=\"text-align:left;\">$19,911.75</td><td style=\"text-align:left;\">$22,452.04</td><td style=\"text-align:left;\">$28,697.64</td><td style=\"text-align:left;\">$29,646.04</td></tr><tr><td style=\"text-align:left;\">FY 2026</td><td style=\"text-align:left;\">$150,693.7</td><td style=\"text-align:left;\">$21,850.58</td><td style=\"text-align:left;\">$24,638.23</td><td style=\"text-align:left;\">$32,148.86</td><td style=\"text-align:left;\">$33,289.36</td></tr><tr><td style=\"text-align:left;\">FY 2027</td><td style=\"text-align:left;\">$165,610.7</td><td style=\"text-align:left;\">$24,013.55</td><td style=\"text-align:left;\">$27,077.14</td><td style=\"text-align:left;\">$35,331.25</td><td style=\"text-align:left;\">$36,584.65</td></tr><tr><td style=\"text-align:left;\">FY 2028</td><td style=\"text-align:left;\">$182,287.9</td><td style=\"text-align:left;\">$26,431.75</td><td style=\"text-align:left;\">$29,803.84</td><td style=\"text-align:left;\">$38,889.16</td><td style=\"text-align:left;\">$40,268.77</td></tr><tr><td style=\"text-align:left;\">FY 2029</td><td style=\"text-align:left;\">$200,974.3</td><td style=\"text-align:left;\">$29,141.27</td><td style=\"text-align:left;\">$32,859.04</td><td style=\"text-align:left;\">$42,875.69</td><td style=\"text-align:left;\">$44,396.73</td></tr><tr><td style=\"text-align:left;\"></td><td style=\"text-align:left;\"></td><td style=\"text-align:left;\"></td><td style=\"text-align:left;\"></td><td style=\"text-align:left;\"></td><td style=\"text-align:left;\">^Final EBITA^</td></tr></tbody></table>Author&#39;s CalculationsThis more conservative model suggests a fair price of $148.1, indicating an upside of 89.3% from the current stock price of $78.2. Looking ahead to FY2029, the projected stock price is $184.2, translating into annual returns of 22.6%. While not as high as the previous model, these returns are still substantial and attractive.<h2 id=\"id_3686040600\">Risks to Thesis</h2>The primary risk factor in this bullish thesis revolves around the influence exerted by the Chinese Government. The government&#39;s control over corporations, as evidenced by the halt in the Ant Group&#39;s IPO in Hong Kong, poses a considerable risk. If there were a concerted effort to sideline Jack Ma, a key figure in the company&#39;s direction, it could deliver a significant intellectual blow to Alibaba. In such a scenario, the company would need to secure an equally capable protector, given Ma&#39;s influential role despite not holding the CEO position.Secondly, there exists the risk of a severe Chinese recession impacting Alibaba&#39;s sales volume. With over 65% of e-commerce revenues hinging on the Chinese market, the company is vulnerable to economic downturns. This vulnerability extends beyond e-commerce to include entertainment platforms and Cainiao, which is intricately tied to e-commerce operations.Lastly, there is the risk of a foreign competitor, such as Amazon.com, Inc. (AMZN), succeeding in growing aggressively within the Chinese market. Alibaba&#39;s lack of logistical infrastructure in the US to counterbalance Amazon&#39;s influence could position the company unfavorably in the long term. To mitigate this risk, Alibaba would need to consider strategic expansion into other markets.<h2 id=\"id_2850560331\">Conclusion</h2>In conclusion, Alibaba Group Holdings Limited emerges as a compelling investment opportunity marked by a resilient business model and diversified revenue streams. Despite recent challenges and regulatory uncertainties, the company&#39;s strategic segments, including e-commerce, cloud, and logistics, showcase robust growth potential domestically and internationally.Throughout two DCF models, we observe that Alibaba&#39;s undervaluation could be as high as 161.9% considering analysts&#39; estimates. However, to make it more conservative, I conducted my own estimates which suggest that Alibaba is undervalued by 89.3%. After conducting the two models, I am assigning Alibaba a stock price target of $148.1, which is an 89.3% upside from the current stock price of $78.2. Furthermore, the stock could reach a price of $184.2 in FY 2029 (year 2028), which translates into 22.4% annual returns.The undervaluation indicators, coupled with the recent stock pullback, suggest this is an attractive entry point for Alibaba Group Holding Limited stock, but investors must remain vigilant to risks associated with governmental influence, economic downturns, and foreign competition. Alibaba&#39;s adeptness in navigating these challenges, coupled with its financial strength and strategic positioning, positions it favorably for long-term growth.Editor&#39;s Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.</body></html>","source":"seekingalpha","collect":0,"html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Alibaba Is Hugely Undervalued?</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nAlibaba Is Hugely Undervalued?\n</h2>\n\n<h4 class=\"meta\">\n\n\n2023-11-23 15:00 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4653737-alibaba-is-hugely-undervalued>Seeking Alpha</a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\nAlibaba Group Holding Limited offers a compelling investment opportunity with a diversified portfolio spanning e-commerce, cloud services, logistics, and digital media, providing resilience in a ...\n\n<a href=\"https://seekingalpha.com/article/4653737-alibaba-is-hugely-undervalued\">Web Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","type":0,"thumbnail":"","relate_stocks":{"LU0053666078.USD":"摩根大通基金-美国股票A（离岸）美元","IE00B19Z9505.USD":"美盛-美国大盘成长股A Acc","LU0079474960.USD":"联博美国增长基金A","BK4559":"巴菲特持仓","BK4538":"云计算","LU0082616367.USD":"摩根大通美国科技A（dist）","GB00BDT5M118.USD":"天利环球扩展Alpha基金A Acc","09988":"阿里巴巴-W","IE0004445239.USD":"JANUS HENDERSON US FORTY \"A2\" (USD) ACC","BK4550":"红杉资本持仓","LU0061474960.USD":"天利环球焦点基金AU Acc","LU0353189680.USD":"富国美国全盘成长基金Cl A Acc","BK4122":"互联网与直销零售","LU0072913022.USD":"UBS (LUX) EQUITY FUND - 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Additionally, the company abandoned its plans to spin off its cloud business, citing uncertainties in the growth trajectory caused by the U.S.-imposed restrictions on AI chip imports.Nevertheless, in this article, I will elucidate using two valuation models why Alibaba is significantly undervalued, marking an undervaluation of up to 80%. This substantial undervaluation provides a considerable margin of security for investors, warranting a \"strong buy\" recommendation. I propose a fair price of $148.1 for the stock.OverviewFQ2 2024 AlibabaFY 2023Q2 2024 EarningsIn FQ2 2024, Alibaba outperformed expectations in earnings but fell short on revenue, with a notable miss of $230 million. Despite this, the company reported an impressive EPS of $2.14, surpassing the consensus by $0.05.The most significant blow to these earnings results came as Alibaba opted to abandon its plan to spin off its cloud business. The rationale behind this decision was a belief that the spin-off would not deliver the anticipated shareholder value. Furthermore, the company pointed to the current export restrictions on AI chips imposed by the U.S., which has cast uncertainty over the prospects of its cloud segment.Adding to the challenges, Alibaba disclosed that Jack Ma's family trust intends to sell 10 million shares valued at $870.71 million on November 21.MarketE-Commerce ChinaAlibaba's primary focus lies in e-commerce, as illustrated in the table below, with a significant dependency on China, representing 67% of this segment. However, since 2021, Alibaba has successfully reduced its reliance on the Chinese market by 3%.In addition to its Chinese and international e-commerce segments, Alibaba operates in the \"wholesale\" segment. This facet involves collaboration with Chinese factories, functioning in a producer-to-consumer model. Notably, the cost per unit decreases with higher purchase quantities.Projections indicate an anticipated growth rate of 8.21% for the Chinese e-commerce market throughout 2027. In contrast, the global e-commerce market is expected to experience a more robust growth rate of approximately 15% by 2032.StatistaPrecedence ResearchLocal Consumer ServicesThe Local Consumer Services segment of Alibaba encompasses a range of diverse services designed to cater to various consumer needs. Among these services are Ele.me, a prominent on-demand delivery platform, Amap, providing digital mapping services along with real-time traffic information, Fliggy, an online travel platform, and Taoxianda, a platform aiding retailers in establishing and managing online stores.Cainiao - Platform Delivery ChinaCainiao, a company 70% owned by Alibaba following its acquisition of the majority stake in 2017, specializes in logistics. Serving as a crucial complement to Alibaba's e-commerce operations in China, Cainiao plays a pivotal role in ensuring timely deliveries within China, often achieving the impressive feat of completing deliveries in less than 24 hours.Notably, the platform delivery segment has experienced recent growth, propelled by the surge in e-commerce sales. Projections indicate a continued growth rate of 5.15% for this market throughout 2027.Author's Calculations with base on StatistaCloud - ChinaAlibaba also boasts a formidable presence in the cloud segment, initially slated for a significant spinoff as part of a major strategic plan. This move garnered widespread acclaim from investors, given the robust prospects of the cloud market in China. Projections estimate a noteworthy growth rate of 20.44%, and the autonomy of an independent Alibaba Cloud company is anticipated to drive rapid revenue expansion and robust cash-flow growth, particularly considering the high profitability associated with cloud services.Notably, the projected growth rate of 20.44% for the Chinese cloud market closely aligns with the impressive revenue growth that Alibaba has consistently demonstrated within its cloud segment.Author's Calculations with base on StatistaDigital Media & Entertainment - ChinaThe final segment in Alibaba's diverse portfolio is Digital Media and Entertainment, featuring key components such as Youku, a prominent video platform, and Alibaba Pictures, which encompasses intellectual property, licensing, and cinema ticketing management for the movie industry. Additionally, the company provides other content platforms and engages in the online gaming sector.Projections for the digital media market in China are optimistic, with an expected growth rate of 10.88%. This growth is anticipated to be fueled by the increasing revenue per user, projected to experience a substantial uptick of 7.6% from 2023 to 2027.StatistaStatistaFinancialAlibaba has demonstrated remarkable revenue growth over the past six years. Since FY2018, the company has achieved an annual revenue growth rate of 35.68%. However, in a recent development, Alibaba experienced its first decline in revenue, with a year-over-year reduction of 5.97%.What stands out is the company's ability to consistently grow its net income, a crucial factor influencing a discounted cash flow (\"DCF\") model. The net income has grown at a commendable annual rate of 15.57%, currently standing at $18.16 billion, though below the 2021 all-time high of $22.98 billion.In terms of margins, a noticeable downward trend is observed in both operating margin and net income margin. In FY2018, these metrics were above 25%, with the operating margin at 28.21% and the net income margin at 25.61%. As of the latest earnings release, both metrics have decreased to 14.66% and 14.50%, respectively.Author's CalculationsAuthor's CalculationsAlibaba's financial foundation appears robust, with a substantial cash reserve of $78.66 billion and a comparatively low debt burden. Long-term debt stands at $21.71 billion, while short-term debt is at $5.4 billion.Author's CalculationsDespite the overall positive financial outlook, Alibaba's free cash flow has experienced annual growth of 9.38%. The free cash flow margin, however, has seen a significant decrease from FY2018's 36.6% to the current level of 18.2%. This indicates a potential decrease in efficiency, and Alibaba attributes this shift to the presence of project-based contracts, which inherently have lower margins. The company is actively working to reduce the impact of these contracts to enhance overall margins.Author's CalculationsAuthor's CalculationsAuthor's CalculationsValuationIn this valuation of Alibaba, I will employ two distinct models: the first relies on analysts' estimates for revenue and net income, while the second model involves my own estimates formulated from scratch. These estimates are based on the anticipated growth rates within the markets of each of Alibaba's operating segments.The table below outlines the assumptions integral to calculating Alibaba's fair stock price. Notably, D&A, interest expenses, and CapEx will be computed using margins tied to revenue.Ultimately, the WACC will be derived from variables such as equity value, debt value, and the cost of debt, utilizing the widely recognized formula.For FY2023 and FY2024, analysts anticipate revenues of $133.3 billion and $145.93 billion, respectively. Subsequently, for FY2026-2029, I will apply an expected forward revenue growth rate of 4.87%.TABLE OF ASSUMPTIONS(Current data)Assumptions Part 1Equity Value141,772.60Debt Value27,182.30Cost of Debt3.49%Tax Rate12.76%10y Treasury4.80%Beta0.89Market Return10.50%Cost of Equity9.87%Assumptions Part 2CapEx4,702.10Capex Margin3.75%Net Income18,168.20Interest948.40Tax2,656.80D&A6,245.60Ebitda28,019.00D&A Margin4.98%Interest Expense Margin0.76%Revenue125,311.9Analysts' EstimatesFor FY2023 and FY2024, analysts are anticipating revenues of $133.3 billion and $145.93 billion, respectively. Looking ahead to FY2026-2029, a forward revenue growth rate of 4.87% will be applied.In terms of net income, analysts project an EPS of $8.92, translating to a net income of $22.63 billion for FY2024. For FY2025, the estimate increases to an EPS of $9.75, corresponding to a net income of $24.74 billion. Subsequently, for FY2026-2029, the anticipated 3-5 year long-term expected EPS growth rate of 17.45% will be applied.RevenueNet IncomePlus TaxesPlus D&APlus Interest2023$133,310.0$22,634.50$25,522.15$32,104.47$33,104.002024$145,930.0$24,740.63$27,896.97$34,479.29$35,478.822025$152,715.7$29,057.86$32,764.99$40,305.48$41,450.522026$159,817.0$34,128.46$38,482.48$46,373.61$47,571.882027$167,248.5$40,083.88$45,197.68$53,455.74$54,709.732028$175,025.6$47,078.51$53,084.67$61,726.73$63,039.04^Final EBITA^Author's CalculationsThe initial model suggests that Alibaba is undervalued by a significant margin, approximately 161.9%. According to this model, the fair stock price is estimated to be $204.9, closely aligning with the stock price on July 9, 2021, when the stock traded at $205.94, a period within the onset of the bear market.Additionally, the model indicates a projected future stock price of $274.7. This implies a potential gain of 41.9% until 2028, aligning with Alibaba's FY2029.Seeking AlphaMy EstimatesIn this alternative model, I have projected the growth of each of Alibaba's segments based on the expected CAGR in their respective markets. The Chinese Retail & Wholesale segments are forecasted to grow at a CAGR of 8.21%, International Retail & Wholesale at 15%, Cainiao in the Platform Delivery market at 5.15%, Chinese cloud at 20.44%, and Chinese Digital Media & Entertainment at a rate of 10.88%. For Local Consumer Services, where estimating revenues is challenging, a conservative growth rate of 5% has been applied, which is notably below the current YoY growth of 16% for this segment.Author's CalculationsRevenueNet IncomePlus TaxesPlus D&APlus InterestFY 2024$125,311.9$18,170.23$20,488.34$26,733.94$27,682.34FY 2025$137,322.4$19,911.75$22,452.04$28,697.64$29,646.04FY 2026$150,693.7$21,850.58$24,638.23$32,148.86$33,289.36FY 2027$165,610.7$24,013.55$27,077.14$35,331.25$36,584.65FY 2028$182,287.9$26,431.75$29,803.84$38,889.16$40,268.77FY 2029$200,974.3$29,141.27$32,859.04$42,875.69$44,396.73^Final EBITA^Author's CalculationsThis more conservative model suggests a fair price of $148.1, indicating an upside of 89.3% from the current stock price of $78.2. Looking ahead to FY2029, the projected stock price is $184.2, translating into annual returns of 22.6%. While not as high as the previous model, these returns are still substantial and attractive.Risks to ThesisThe primary risk factor in this bullish thesis revolves around the influence exerted by the Chinese Government. The government's control over corporations, as evidenced by the halt in the Ant Group's IPO in Hong Kong, poses a considerable risk. If there were a concerted effort to sideline Jack Ma, a key figure in the company's direction, it could deliver a significant intellectual blow to Alibaba. In such a scenario, the company would need to secure an equally capable protector, given Ma's influential role despite not holding the CEO position.Secondly, there exists the risk of a severe Chinese recession impacting Alibaba's sales volume. With over 65% of e-commerce revenues hinging on the Chinese market, the company is vulnerable to economic downturns. This vulnerability extends beyond e-commerce to include entertainment platforms and Cainiao, which is intricately tied to e-commerce operations.Lastly, there is the risk of a foreign competitor, such as Amazon.com, Inc. (AMZN), succeeding in growing aggressively within the Chinese market. Alibaba's lack of logistical infrastructure in the US to counterbalance Amazon's influence could position the company unfavorably in the long term. To mitigate this risk, Alibaba would need to consider strategic expansion into other markets.ConclusionIn conclusion, Alibaba Group Holdings Limited emerges as a compelling investment opportunity marked by a resilient business model and diversified revenue streams. Despite recent challenges and regulatory uncertainties, the company's strategic segments, including e-commerce, cloud, and logistics, showcase robust growth potential domestically and internationally.Throughout two DCF models, we observe that Alibaba's undervaluation could be as high as 161.9% considering analysts' estimates. However, to make it more conservative, I conducted my own estimates which suggest that Alibaba is undervalued by 89.3%. After conducting the two models, I am assigning Alibaba a stock price target of $148.1, which is an 89.3% upside from the current stock price of $78.2. Furthermore, the stock could reach a price of $184.2 in FY 2029 (year 2028), which translates into 22.4% annual returns.The undervaluation indicators, coupled with the recent stock pullback, suggest this is an attractive entry point for Alibaba Group Holding Limited stock, but investors must remain vigilant to risks associated with governmental influence, economic downturns, and foreign competition. Alibaba's adeptness in navigating these challenges, coupled with its financial strength and strategic positioning, positions it favorably for long-term growth.Editor's Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.","news_type":1},"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"}],"hasMoreComments":true,"newsSizeData":{"likeSize":21,"commentSize":5,"repostSize":5,"favoriteSize":2,"likeStatus":false,"favoriteStatus":false}}