Alibaba Group Holding Limited

BABA Details

Alibaba Group Holding Limited (NYSE: BABA) is a holding company that provides merchants, brands, and other businesses with a technical framework and advertising reach, allowing them to leverage innovative technologies to communicate with customers and run their businesses more efficiently. Its operating segments are 1) Core Commerce, 2) Cloud Computing, 3) Digital Media and Entertainment, and 4) Innovation Projects and Others.

Latest News:

• Recent Updates: On March 21, 2022, BABA announced that the Company's board of directors had approved an increase in its share repurchase programme from USD 15 billion to USD 25 billion as a demonstration of confidence in the Company's future growth. Weijian Shan, executive chairman of investment firm PAG, was also named to the Company's board of directors as an independent director.

Q3FY21 Results:

• Growth in Topline: The company reported a YoY growth of 9.72% in revenue to USD 242.58 billion in Q3FY21 (ended December 31, 2021) from USD 221.08 billion in Q3FY20, driven by 6.76% growth in Total China commerce.
• Decline in Profitability: In Q3FY21, BABA net income dropped to USD 20.43 million from USD 79.43 million in Q3FY20.
• Cash and Debt Position: The company had USD 494.93 billion in cash and cash equivalents (including short-term investments) as of December 31, 2021, and total debt of USD 139.64 billion.

Key Risk:

• Competition Risk: BABA operates in Internet & Direct Marketing Retail industry. It faces direct competition from significant Chinese internet companies like Tencent and global e-commerce players, such as Amazon, which could jeopardise its commercial interests.
• Political and Regulatory Risk: The Chinese authorities' recent crackdown on its US-listed businesses and the consequent possibility of stricter rules could dent its operations. After the passage of a bill in the US, this could lead to the delisting of some Chinese companies from the country's exchanges (if the US authorities cannot satisfactorily audit the company for three consecutive years).

Valuation Methodology: Price/Earnings Multiple Based Relative Valuation

 (Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks. 

Stock Recommendation:

BABA' stock price has fallen 38.38% in the past six months and is currently leaning towards the lower end of its 52-week range of USD 73.28 to USD 236.17. We have valued the stock using the Price/Earnings-based relative valuation methodology and arrived at a target price of USD 112.53.

Considering the correction in the stock price, solid balance sheet, strong margins, associated risks, and current valuation. We recommend a "Hold" rating on the stock at the closing price of USD 100.38, down 0.82% as of May 03, 2022.

Three-Year Technical Price Chart (May 03, 2022). Source: REFINITIV, Analysis by Kalkine Group

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: All forecasted figures and industry information have been taken from REFINITIV.  

Note 3: The report publishing date is as per the Pacific Time Zone.