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'New CEO Setting New Horizon' For Alibaba, Morgan Stanley Says

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In a report published Thursday, Morgan Stanley analysts maintained an Overweight rating on Alibaba Group Holding Ltd (NYSE: BABA), following media reports of new CEO Daniel Zhang highlighting the company's strategic focuses over the next five years.

According to Forbes, the company's new CEO echoed Jack Ma's speech made several weeks ago on topics such as having a younger management teams; avoiding practices that harm the ecosystem and being innovative, nimble and unafraid of failure. Zhang reiterated the target of achieving US$1 trillion GMV in the next five years with less than 50k employees.

In the report Morgan Stanley noted, "“Alibaba needs to add more value to merchants than generating traffic” was a key message that stood out to us. Throughout his speech he emphasized Alibaba's need to improve tools and services for the merchants in order to serve their customers better."

The analysts enumerated the key services and business units that could be strategically important for the company in the next five years:

  • AliCloud Service appears to be the highest priority - The analysts believe that although this unit may not become "a significant revenue contributor" in the near term, the company could increase investments in data centers infrastructure to boost growth and market share.
  • Globalization of Alibaba - The analysts expect Alibaba to partner with companies invested outside of China.
  • Independence of Alimama as a premier digital marketing platform - "We believe Alibaba has one of the most comprehensive consumer data sets among the BAT and the company is likely to become more “open to share” under the new mobile era," the report said.
  • China Smart Logistics Network (CSLN) = Heart of eCommerce - The analysts expect CSLN to be the most important business unit supporting the company's core e-Commerce through the next three years.
  • Expanding beyond physical goods eCommerce - "Daniel believes Alibaba could take larger shares in dining, travel, entertainment, food & beverage and healthcare in the future," the analysts commented.

Latest Ratings for BABA

DateFirmActionFromTo
Jun 2017JP MorganReinstatesOverweightOverweight
Apr 2017Standpoint ResearchDowngradesBuyReduce
Apr 2017BenchmarkInitiates Coverage OnBuy

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Posted-In: Morgan StanleyAnalyst Color Reiteration Analyst Ratings

 

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