[Updated 09/22/2021] Alibaba Inventory Update
Alibaba actions (NYSE: BABA) has fallen 33% since the end of fiscal 2021 (ended March 2021). In comparison, the S&P 500 rose 10% over the same period. According to Trefis’ Alibaba valuation is $ 229 indicating a potential rise. For the first quarter of 2022 (ended June 2021), the company reported revenue of $ 31.9 billion, up 46% year-on-year, led by the retail segment of China Commerce and the international trade segment. Meanwhile, earnings for the first quarter of fiscal 2022 were almost flat compared to the same period a year earlier due to higher operating expenses. In the current year, Alibaba’s stock fell mainly as China continued its regulatory crackdown during the year. The previous week, shares fell on reports that Chinese regulators ordered Ant Group to consolidate its lending business into a separate entity, while in the past two days all Chinese stocks fell in response to reports that Chinese real estate giant Evergrande Group could be forced into bankruptcy.
Overall, however, we believe that Alibaba at current price has upside potential due to expected revenue growth. In fiscal year 2022, we expect Alibaba revenue to reach 817.4 billion RMB ($ 124.8 billion). In addition, its net income is expected to increase to around 127 billion RMB ($ 19.3 billion), bringing its EPS to 46.98 RMB ($ 7.05). In fiscal year 2023, revenue is expected to reach 934.4 billion RMB ($ 142.6 billion). In addition, its net income is expected to increase to around 152 billion RMB ($ 23.2 billion), bringing its EPS to 56.37 RMB ($ 8.46). which coupled with the P / E multiple of 26.6x and an exchange rate of $ 0.15 per RMB will lead to Alibaba valuation about $ 229, or 40% above its current market price.
[Updated 03/17/2021] Do Alibaba Stocks Have an Advantage?
Up 27% since the end of 2019, Alibaba actions (NYSE: BABA) still has upside potential of 40%. BABA stock has risen 27% from $ 182 at the end of 2019 to almost $ 232 now, compared to the S&P 500 which has gained 22% since late 2019. The company has seen its revenues and profits increase in recent years, while its P / E multiple has fallen.
Despite the Covid-19 crisis, BABA has seen its turnover increase by 42% in the first 3 quarters of 2020, with consumers preferring online shopping over physical visits. In the third quarter of 2021 (ended December 2020), Alibaba reported revenue of $ 33.8 billion, up 45% year-on-year, and profit of $ 4.42 per ADS vs. 2, $ 81 for the same period of the previous year.. In addition, the company reported $ 15.8 billion in cash inflows from operating activities for the first nine months.
For fiscal year 2022, we expect Alibaba revenue to reach $ 126.8 billion (RMB 838.6 billion). In addition, its net profit is expected to reach $ 24.1 billion (RMB 159 billion), increasing its EPS to $ 9.03, which together with a P / E multiple of around 35.7x and a rate exchange rate of $ 0.15 per RMB, will lead to Alibaba valuation around $ 323, or 40% above its current market price.
[Updated 09/02/2020] Alibaba Stock: what’s going on with Amazon’s Chinese rival?
After rising nearly 70% from the lows in March this year, at the current price of approximately $ 295 per share, we think Alibaba actions (NYSE: BABA) has more to do. The main Chinese e-commerce giant was growing rapidly at the start of the coronavirus crisis, and the lockdown has only made it stronger as more people embrace and increase the number of online purchases and realize the importance of cloud computing. Internet retailer saw its stock outperform during the coronavirus crisis, with an increase of 40% since the start of the year (compared to a growth of 9% for the S&P). Alibaba’s stock is also around 62% higher than it was at the end of fiscal 2018 (year ending March), just over 2 years ago.
Most of Alibaba’s 6% share price growth between fiscal 2018-2020 (fiscal year ends March) is due to the retailer’s impressive revenue growth of 80%. In addition, the company’s adjusted earnings per share (EPS) also increased by 43% during this period. Much of it growth was not valued in action, possibly due to China’s economic instability and trade war uncertainty. To add to this, Alibaba’s adjusted net margin contracted from 33.2% in fiscal 2018 to 26.0% in fiscal 2020, as it continued to expand its ecosystem, which includes the unprofitable units of cloud, digital media and innovation. Rising costs and increased sales of low-margin products caused margins to plummet, causing the P / E multiple to drop from 35x to 26x during this time period. Although the multiple is currently at 40x levels, we expect it to continue to grow thanks to Alibaba’s competitive advantages and growth opportunities in China.
So what’s the trigger for the upside?
In the last fiscal quarter, Alibaba’s revenue grew 34% year-on-year, driven by robust growth in its retail and cloud computing business in China. Its non-GAAP profits increased 18% year-on-year. Alibaba’s primary Chinese market had 742 million annual active consumers and 874 million monthly active mobile users as of June 2020, more than twice the total population of the United States.
Alibaba will continue to generate most of its revenue from its commerce and cloud computing activities in the short to medium term. The company’s main e-commerce activities, which account for around 86% of total revenue, have much higher margins, especially lighter support infrastructure, and are less capital intensive. However, its small businesses that include digital media and innovation initiatives could be a long-term bright spot as they still have plenty of room to grow. Alibaba also appears to be in a better position to harness the purchasing power of China’s burgeoning middle class, given that it is China’s largest e-commerce company in terms of gross value of goods.
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