DBS remains bullish on the Hong Kong-listed shares of Alibaba Group Holding Limited (HK:9988), projecting 44% upside potential. Following the company’s June quarter results last week, analyst Sachin Mittal from DBS confirmed a Buy rating on the stock. Mittal is optimistic about the company’s dominant position in the e-commerce industry and its diversified business portfolio. Overall, the stock has a Moderate Buy rating on TipRanks.
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Alibaba is a Chinese technology company known for its online marketplace.
DBS Bullish on Alibaba’s Future Growth
DBS is overall bullish on Alibaba’s diversified portfolio that includes cloud computing, digital media, and entertainment, which supports its solid revenue base and a Buy rating.
In addition, Mittal highlighted the growth potential of Alibaba’s international commerce platforms, including AliExpress, Lazada, and Trendyol. In the June quarter, Alibaba’s International e-commerce business was its star performer, with sales increasing 32% year-over-year. Mittal expects a CAGR (compound annual growth rate) of 23% for this segment from FY24 to FY27. DBS is also confident in the company’s Cloud Computing business and expects a CAGR of 9% over the same period.
Starting in September 2024, Alibaba will implement a 0.6% service fee on GMV (gross merchandise value) per transaction for its merchants on Taobao and Tmall. Mittal believes this will boost customer management revenue (CMR) and earnings. DBS forecasts a 7% growth in the company’s CMR in FY25.
Mittal’s Ranking on TipRanks
According to the TipRanks’ ranking, Mittal is a five-star rated analyst. He ranks 168 out of more than 8,900 analysts on TipRanks. With a 78% success rate, Mittal has achieved an average return of 21.7% per rating.
TipRanks evaluates numerous financial experts, ranking them according to their success rate, average return, and statistical significance. Users could leverage this tool to discover and track leading financial experts and analyze their performance on individual stocks. This, in turn, could help them identify new investment opportunities.
Highlights from Alibaba’s Latest Results
Alibaba reported a mixed set of results for the June quarter. The company delivered a strong performance in the Cloud business, with revenue rising 6% year-over-year to ¥26.5 billion. This growth was fueled by artificial intelligence (AI) product adoption and robust public cloud growth. On the other hand, revenue from Alibaba’s e-commerce unit, the Taobao and Tmall Group, decreased 1% year-over-year to ¥113.37 billion.
Overall, the company’s revenue increased by 4% year-over-year to ¥243.2 billion. Meanwhile, it reported a 27% fall in its net income to ¥24.02 billion.
Are Alibaba Shares a Good Buy?
Year-to-date, Alibaba stock has gained 7.6%.
On TipRanks, 9988 stock has received three Buy and two Hold recommendations. The Alibaba share price target is HK$99.10, which implies 22% upside potential on the current trading price.
