Thursday was set up to be a big day for Alibaba (BABA). The Chinese e-commerce giant is readying to present F2Q21 results, with favorable macro trends pointing to another display of strength. On the same day, Ant Financial – Alibaba’s sister company in which it claims 33% direct equity ownership – was supposed to list on the Shanghai Stock Exchange. At $37 billion, equating to a $310 billion valuation, the listing is set to be the largest IPO on record.
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But it appears the latter is now on hold. On Tuesday, the exchange disqualified Ant Group’s listing, citing a “changing regulatory environment” as the reason behind the rejection. On Monday, government officials and representatives of the People’s Bank of China called in Ant Group’s and Alibaba’s co-founder Jack Ma for a meeting, to discuss their views on “the health and stability of the financial sector.”
As a result, the simultaneous listing on The Hong Kong Stock Exchange has also been put on hold.
The bad news sent BABA shares down by 7% in Tuesday’s trading session. It all makes for an intriguing backdrop to the release of BABA’s quarterly results.
Commenting on the latest development, Truist analyst Youssef Squali said, “This IPO has been anticipated for years, and recent investors’ excitement around it helped drive BABA shares higher, in our view. With BABA shares selling off today, we should note that this development has no direct bearing on BABA’s operations, with the company slated to report strong F2Q21 earnings Thursday morning.”
Heading into the print, the 5-star analyst expects Alibaba to show “strength across its various segments.”
Squali expects net revenue of 157.2 billion RMB, a 32% year-over-year uptick and ahead of the consensus calls for 155.4B RMB. The analyst also anticipates a beat on EBITA, expecting 42.9 billion RMB compared to the Street’s 41.3 billion RMB forecast.
Along with making the most from the “digitization of the Chinese public and private sector economy,” Squali believes China’s post pandemic recovery will “continue to have a positive impact” and expects the company to “grow the top line at an average of ~28% per year for the next 3 years.”
Overall, Squali sticks to his Buy rating alongside a $308 price target. The implication for investors? Upside of 6%. (To watch Squali’s track record, click here)
Squali has the Street’s full backing; All 22 other analysts who have posted a recent BABA review rate the stock a Buy. The average price target stands at $335.9 and implies possible upside of ~15% over the next months. (See BABA stock analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
