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's stock now has a clear path to trade north of $200 per share, at least according to analysts at HSBC Global Research. The firm's
maintains a Buy rating on
Alibaba's stock with a price target boosted from $184 to $204 based on a new financial valuation model (see Tsang's track record here).
The analyst's prior price target was based on a discounted cash flow model for Alibaba and to sum the values of its assets, including Ant Financial and net cash. But now a new valuation divides Alibaba into multiple segments that should be valued differently, including:
- The core e-commerce platform.
- Alibaba's cloud computing unit.
- Digital media and entertainment.
- Innovation initiatives and others.
The "additional granularity" of breaking down Alibaba's business by segment makes a more "robust" valuation model as different segments deserve different multiples, the analyst explained. For example, the core e-commerce business should be modeled at 18x fiscal 2019e EBITA which is a premium to the other remaining segments, which are valued at 5x fiscal 2019e revenue.
Here is the analyst's breakdown and value per share per segment:
- Core e-commerce: $163 per share.
- Cloud computer: $6 per share.
- Digital media and entertainment: $8 per share.
- Innovation and Other: $1 per share.
- Ant Financial (33 percent stake): $8 per share.
- Investments: $9 per share.
- Net cash fiscal 2018e: $10 per share.
- Target value: $204 per share.
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Posted In: Analyst ColorLong IdeasReiterationTop StoriesAnalyst RatingsTrading IdeasAlibaba CloudChi TsangChinaChina eCommerceecommerceHSBC Global Research
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