Fitch Remains Positive On Alibaba; Expects To Retain Key Market Positions, Healthy Relation With China

  • Fitch Ratings has affirmed China-based Alibaba Group Holding Limited's BABA Long-Term Foreign-Currency Issuer Default Rating (IDR) and senior unsecured rating at 'A+.' The Outlook is Stable
  • Fitch also affirmed Alibaba's outstanding senior unsecured notes at 'A+.'
  • Fitch expects that Alibaba will maintain its key market positions and healthy relationships with China's government and regulatory authorities. 
  • Economic challenges and keen competition may weigh on Alibaba's profitability and cash generation in the near term. 
  • Fitch believes Alibaba's profitability bottomed in 1Q23 and should start to recover from 2Q23 at a modest pace despite the challenging economic environment. 
  • Fitch expects a more robust recovery in Alibaba's revenue and profitability is more likely in FY24.
  • Fitch expects Alibaba to maintain its market leadership due to its substantially more significant scale, fuller product categories, sticky customer base with considerably higher spending, comprehensive fulfillment capabilities, and more substantial financial resources.
  • Alibaba continues to enhance its loss-making businesses. It reduced losses in Taobao Deals and Freshippo in 1Q23. Taocaicai's losses narrowed sequentially in 1Q23.
  • However, its credit profile should remain stable, underpinned by its leadership in China's commerce and cloud-service markets, substantial cash generation, and conservative capital structure.
  • Price Action: BABA shares traded lower by 0.88% at $79.29 in the premarket on the last check Monday.
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