On Monday, Morgan Stanley (NYSE:MS) made adjustments to Alibaba (NYSE:BABA) Group Holding Limited's (NYSE:BABA) financial outlook, reducing the e-commerce giant's price target from $115.00 to $105.00, while maintaining an Equalweight rating on the stock.
The firm's analyst cited several factors contributing to this decision, including Alibaba's expected market share loss and the performance of its various business segments.
The company's gross merchandise volume (GMV) observed "robust growth" during the Double-11 shopping festival, yet the analyst anticipates Alibaba to continue facing challenges. Specifically, the company is underperforming in certain categories that are benefiting from trade-in programs.
This is expected to lead to a GMV increase of only 5% year-over-year, which is modest compared to the industry's online retail sales growth of 11.3% in October, as reported by the National Bureau of Statistics (NBS (LON:NBS)).
Despite Alibaba experiencing a full quarter of benefits from software service fees compared to just one month in the fiscal second quarter, management has not committed to further improvements in the take-rate. The expectation is for a stable take-rate, with customer management revenue (CMR) projected to rise by 5% year-over-year, aligning with the growth in GMV.
The forecast for Alibaba's cloud revenue is a 12% year-over-year increase, while the international business revenue is projected to grow by 28%. However, the Total (EPA:TTEF) Transaction (JO:TCPJ) Growth (TTG) EBITA is anticipated to decline by 4.5% year-over-year due to reinvestments. In contrast, the consolidated EBITA is expected to remain largely flat year-over-year, with reductions in non-core losses.
In other recent news, Alibaba Group Holding Limited has reported a notable 5% year-over-year increase in consolidated revenue during its Q3 2024 earnings call, reaching RMB 236.5 billion. This growth has been primarily driven by its core e-commerce and cloud services segments.
Despite a 70% decrease in free cash flow, largely attributed to investments in cloud infrastructure, Alibaba is maintaining an optimistic outlook on its AI-driven strategy and future growth prospects.
The company's e-commerce segment reported a slight revenue increase, with Taobao and Tmall generating RMB 99 billion, while its Cloud Intelligence Group revenue grew by 7% to RMB 29.6 billion. In a significant development, AI-related products have seen triple-digit growth for the fifth consecutive quarter.
Furthermore, Alibaba's International Digital Commerce revenue surged by 29%, driven by cross-border business. Despite a drop in free cash flow, the company's cash position remains strong at RMB 352.1 billion. These are among the recent developments that highlight Alibaba's strategic AI and cloud infrastructure investments, positioning it for sustainable growth in the digital economy.
InvestingPro Insights
To complement Morgan Stanley's analysis, recent data from InvestingPro offers additional perspective on Alibaba's financial position. The company's market capitalization stands at $201.47 billion, with a P/E ratio of 18.45. This valuation metric, when considered alongside Morgan Stanley's reduced price target, suggests investors are still pricing in growth expectations despite the challenges outlined.
InvestingPro Tips highlight that Alibaba's revenue growth has been positive, with a 5.14% increase over the last twelve months as of Q2 2025. This aligns with Morgan Stanley's projection of a 5% year-over-year GMV increase, indicating that the company is maintaining growth, albeit at a slower pace than the broader online retail market.
Another relevant InvestingPro Tip points out that analysts have recently revised their earnings expectations for Alibaba upwards. This contrasts with Morgan Stanley's cautious outlook and suggests that there may be diverging views on the company's near-term performance among market analysts.
For investors seeking a more comprehensive analysis, InvestingPro offers 21 additional tips for Alibaba, providing a deeper dive into the company's financial health and market position.
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