DBS analysts remain bullish on the Hong Kong-listed Alibaba Group Holding Limited (HK:9988), predicting an upside potential of around 80% in the share price. Recently, analyst Sachin Mittal from DBS maintained a Buy rating on Alibaba stock after the tech giant released its second-quarter results for FY25. Overall, the stock has a Strong Buy rating on TipRanks.
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Alibaba is a Chinese technology company known for its online marketplace.
Alibaba’s Q2 Results Shine on Cloud and E-commerce Strength
In its September quarter results, Alibaba’s revenue reached ¥236.5 billion, marking a 5% year-on-year increase. Alibaba’s Taobao and Tmall posted 1% revenue growth amid a challenging retail environment in China. Additionally, Alibaba highlighted growth in gross merchandise volume (GMV) for Taobao and Tmall Group during its 16th annual shopping festival, along with a record number of active buyers.
Meanwhile, its Cloud Intelligence Group reported ¥29.6 billion in revenue, reflecting a 7% year-over-year growth.
DBS Sees Strong Future for Alibaba
Mittal continues to feel confident about Alibaba’s diversified portfolio, supporting its strong revenue base. Overall, he expects its earnings to bottom in the Fiscal Year ending in March 2025. Post that, he believes that Alibaba’s earnings will recover, driven by growth in its Cloud and E-commerce segments.
Regarding the Cloud business, DBS expects it to achieve a consistent 9% CAGR (compound annual growth rate) from FY24 to FY27, driven by growing demand for public cloud and AI-related products.
Mittal further noted that GMV growth slowed to around 2.5% from the high single digits in the previous quarter, falling short of the expected 6%. However, the GMV loss is expected to be temporary, as third-party data shows Alibaba’s GMV grew 10% during Double 11 (a sales event to boost shopping).
Moreover, the decline in GMV had a minimal impact on its CMR (customer management revenue). CMR refers to the advertising revenue and commissions generated from Alibaba’s e-commerce platforms. Moving forward, Mittal expects CMR growth to accelerate further in Q3, driven by the full-quarter impact of the software service fee.
Mittal’s Ranking on TipRanks
Mittal is a five-star-rated analyst on TipRanks, ranking 141 out of over 9,100 analysts. With a 76% success rate, he has delivered an average return of 21.5% per rating.
TipRanks ranks financial experts based on success rate, average return, and statistical significance, allowing users to track and analyze top analysts’ performance on stocks to identify new investment opportunities.
Is Alibaba a Good Stock to Buy Now?
Year-to-date, Alibaba stock has gained 10%.
On TipRanks, 9988 stock has received a Strong Buy rating from analysts, based on unanimous Buy recommendations from seven analysts. The Alibaba share price target is HK$128.75, which implies 60% upside potential on the current trading price.
