On Monday, Mizuho (NYSE:MFG) reiterated its Outperform rating and $113.00 stock price target for Alibaba (NYSE:BABA) Group Holding Limited (NYSE:BABA). The firm's positive stance comes after the company reported a quarter that the analyst described as encouraging, with an acceleration in CMR growth indicating progress in Alibaba's monetization strategy.
The analyst highlighted several positive leading indicators, including double-digit order growth and increased purchase frequency. These improvements are attributed to Alibaba's investments in user experience, customer service, and an expanded selection of products. The report also noted increasing efficiency in Alibaba's businesses outside of China commerce, encompassing local services, logistics, and cloud computing.
Mizuho's confidence in the company's prospects is further supported by signs of stabilization in China's e-commerce sector. The firm has maintained its FY26 revenue estimate for Alibaba at 212 billion RMB. The Outperform rating is sustained with a price target of $113, based on 8x FY26 EBITDA (earnings before interest, taxes, depreciation, and amortization).
The analyst also pointed out Alibaba's active buyback program, which is approximately $30 billion. According to the report, Alibaba's valuation is compelling at 6x FY26 EBITDA, especially as economic and geopolitical concerns are considered to be largely reflected in the current stock price. The maintenance of the Outperform rating and price target underscores Mizuho's view of Alibaba's strong potential for growth and value creation for shareholders.
In other recent news, Alibaba Group Holding Limited reported a 5% year-over-year increase in consolidated revenue during its Q3 2024 earnings call, reaching RMB 236.5 billion. The growth was primarily driven by its core e-commerce and cloud services segments. Despite a significant 70% decrease in free cash flow due to investments in cloud infrastructure, the company maintains optimism in its AI-driven strategy and future growth prospects.
Benchmark reaffirmed its Buy rating on Alibaba, acknowledging the company's strategic moves, such as tapping into new user growth sources and reducing losses from non-core assets. However, Morgan Stanley (NYSE:MS) adjusted Alibaba's financial outlook, reducing the price target due to anticipated market share loss and mixed performance in various business segments.
Susquehanna, on the other hand, sustained a positive stance on Alibaba, citing the company's strong position within the Chinese e-commerce market and its significant growth potential. These are among the recent developments concerning Alibaba.
InvestingPro Insights
Complementing Mizuho's optimistic outlook, recent InvestingPro data offers additional context to Alibaba's financial position. The company's market capitalization stands at $201.47 billion, with a P/E ratio of 18.45, suggesting a reasonable valuation relative to earnings. Alibaba's revenue for the last twelve months reached $137.08 billion, with a 5.14% growth rate, aligning with Mizuho's observations of accelerating growth.
InvestingPro Tips highlight Alibaba's strong profitability, with a gross profit margin of 38.2% and an operating income margin of 13.71% over the last twelve months. This robust profitability supports the company's ability to invest in user experience and expand its services, as noted in the Mizuho report.
Investors might find it interesting that Alibaba's stock is currently trading at 75.19% of its 52-week high, potentially indicating room for upside. Moreover, InvestingPro calculates a fair value of $141.54 for Alibaba, suggesting significant potential for price appreciation from its previous close of $88.59.
For those seeking a deeper dive into Alibaba's prospects, InvestingPro offers 20 additional tips, providing a comprehensive analysis to inform investment decisions.
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