Alibaba (BABA) – Alibaba has 63% upside and room to expand, says bullish analyst

  • Mizuho analyst James Lee reiterated a buy on Alibaba Group Holding Limited BABA with a price target of $160.
  • The revaluation follows an investor call with Alibaba, leaving it confident about the margin expansion story.
  • He expects September quarter GMV growth to improve from June to 5% YoY and a positive turnaround in December as demand for discretionary products picks up during Singles Day promotions with the reopening of the supply chain.
  • Lee predicts the cancellation rate will drop in the second half of CY22 as shipping capacity normalizes, leading to increased profitability.
  • He expects lower-level market investments to moderate losses, providing ample room for margin expansion, which could potentially add 10 points to the long-term margin.
  • The analyst said management should focus on electric vehicles and financial services, which have the most data demand.
  • BABA seems to have a competitive advantage in the financial sector due to its experience in supporting Alipay and Ant Group.
  • In EV, the company holds a stake in XPeng Inc XPEV.
  • For the public sector, security is essential, which is why BABA offers private cloud solutions.
  • Lee expects the TAM for these projects to be large and well funded.
  • Price action: Shares of BABA traded down 0.47% at $97.53 when last checked on Monday.
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