Analysts React to Alibaba's Q1 Performance: Hiked Expectations and Optimism in the Air

Bernstein analyst Robin Zhu maintained a Hold rating on Alibaba Group Holding Limited BABA, with a price target of $100.00.

Alibaba's Q1 FY24 results surpassed street estimates and internal projections by 4-5%, with adjusted EBITA exceeding expectations by mid-teens percentages.

Taobao and Tmall Group revenue, including the core e-commerce platform and related segments, grew by 12.1% YoY, while segment EBITA saw a 9.1% YoY increase. Cloud revenue, reported on a gross basis with intra-Alibaba transfers, rose 4.1% YoY to RMB25.1 billion.

International, Local Consumer Services, and Cainiao revenues reported 40.7%, 29.8%, and 34.0% YoY growth rates, respectively.

Despite the positive results, it's acknowledged that the June quarter was the peak in terms of easy comparisons, and maintaining high growth in GMV and CMR may be challenging moving forward.

Amid recent sector-level shifts in sentiment tied to hopes of macro stimulus, other companies with more explicit growth paths and less macro dependence might be more appealing within the Internet sector.

Zhu estimates revenue of RMB965.5 billion (prior RMB942.4 billion) in FY24 and RMB1,025.7 billion (prior RMB1,015.2 billion) in FY25.

Benchmark analyst Fawne Jiang maintained a Buy rating with a price target of $180.00.

Alibaba delivered a strong Q1, surpassing revenue and profitability consensus estimates by a significant margin. The quarter's operating metrics showed growth in user and merchant numbers, signaling the effectiveness of the consumer-centric approach and paving the way for enhanced competitiveness in value-for-money categories.

Strategic assets like international retail, Cainiao, and local services have seen substantial growth and improved profitability, contributing to a positive outlook. 

The core Taobao Tmall Group (TTG) experienced a turnaround. Growth was observed across vital strategic assets; international retail grew 60% YoY, Cainiao 34% YoY, and local service 30% YoY.

BABA's enhanced growth outlook prompted an upward revision of revenue estimates for FY24 and FY25. 

Jiang estimates revenue of RMB968 billion (prior RMB959 billion) in FY24 and RMB1,075 billion (prior RMB1,059 billion) in FY25.

Morgan Stanley analyst Gary Yu reiterated an Overweight with a price target of $150.00. The analyst maintained the stock as top pick.

Recovery is underway, but the trajectory remains uncertain due to macroeconomic softness. Focusing on return-focused investment cycles and loss reduction across segments will likely support the earnings growth outlook.

Customer Management Revenue (CMR) showed a recovery path.

Taobao & Tmall Group's operational strategy, geared towards growth, is yielding positive results. 

Alibaba International Digital Commerce Group (AIDC) is a bright spot, with major international retail platforms performing solidly.

Profitability improvement exceeds expectations. Alibaba's disciplined spending and focus on ROI are expected to continue, along with cost optimization efforts and sustained loss-narrowing in other businesses.

Continued loss reduction in other segments provides a buffer for the core business, allowing it to maintain its leading scale.

Yu estimates revenue of RMB974.3 billion in FY24 and RMB1,085.8 billion in FY25.

Price Action: BABA shares closed lower by 3.52% at $95.72 on the last check Friday.

Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.