Guang Niu
Alibaba (NYSE:BABA) shares rose on Friday as investment firm Morgan Stanley said it foresees a “softer recovery” for the Chinese internet giant, as Customer Management Revenue is expected to decline in the second-quarter and merchant sentiment remains soft.
Analyst Gary Yu said that although gross merchandise volumes improved in July compared to May and June, it’s likely there was only “limited improvement” in August and September likely saw pressure.
“We forecast GMV to decline 2% [year-over-year] in [second-quarter] from mid-single digit decline in first-quarter,” Yu wrote in a note to clients, while lowering his price target to $110 from $140.
“Softer merchant sentiment may continue to impact take rate and thus there could still be a gap between [gross merchandise volume] and customer management revenue growth, which should narrow quarter-over-quarter given fewer order cancellations.”
Alibaba (BABA) shares tacked on more than 1% in early trading on Friday to $80.40.
Looking to the second-quarter, Yu expects Alibaba (BABA) to generate 3% revenue growth to 207B Rmb on lower CMR and cloud revenue. However, adjusted EBITA is likely to see a healthy 16% year-over-year growth to 32.6B Rmb on continued operating efficiencies.
While there is still a road to recovery that is hampered by broader macro issues, Yu noted that Alibaba’s (BABA) operating efficiency is likely to “support near-term earnings amid macro uncertainty” and at 10 times adjusted 2023 earnings, the stock’s valuation looks “attractive.”
On Thursday, Citi tweaked its estimates on Alibaba (BABA) noting the company has improved operational efficiency, but weaker consumption due to rising COVID-19 cases and associated lockdowns may hurt sales.
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