Goldman Sachs: Downgrades Alibaba-W's earnings forecast for the next two years, maintains "Buy" rating
Goldman Sachs has lowered its earnings forecast for Alibaba-W for the next two years while maintaining a "Buy" rating. It expects the unit economics of food delivery and instant retail to improve in the coming months and believes that the fiscal quarter ending September will be the peak of losses for these related businesses. Goldman Sachs has reduced its adjusted net profit forecast attributable to common shareholders for the fiscal years 2026 and 2027 by 9% and 4%, respectively, and lowered its EBITA forecast by 11% and 1%. At the same time, it has raised the target price to HKD 158 and USD 163
According to the Zhitong Finance APP, Goldman Sachs released a research report stating that Alibaba-W (09988, BABA.US) exceeded expectations in its cloud business and capital expenditures for the first fiscal quarter ending June this year. They reiterated their positive outlook on AI-driven growth and maintained a "Buy" rating. Goldman Sachs has lowered its adjusted net profit forecast for Alibaba for the fiscal years 2026 to 2027 by 9% and 4%, respectively, and reduced the group's EBITA forecast by 11% and 1%. However, they raised the profit and EBITA forecasts for the fiscal year 2028 by 2%, believing that continued investment in e-commerce and cloud business can drive growth, with target prices for Hong Kong and US stocks raised to HKD 158 and USD 163.
The bank indicated that Alibaba's operational visibility has improved, with management revealing that the unit economics for food delivery and instant retail are expected to improve significantly in the coming months. In other words, they believe that the second fiscal quarter ending September 30 will be the peak of losses for these related businesses. The group is also confident in maintaining revenue growth from customer management for the remaining quarters of the fiscal year 2026, believing it can alleviate market concerns about significant investments in instant retail.
Goldman Sachs has raised its forecast for Alibaba's instant retail losses in the second fiscal quarter from the original RMB 20 billion to RMB 31 billion, compared to a loss of RMB 11 billion in the first fiscal quarter. They expect that as the group's subsidies normalize and delivery efficiency improves, the loss per order in the third fiscal quarter will be halved. The bank anticipates that Alibaba's market share in food delivery and instant retail will ultimately stabilize at 40%, while competitors Meituan-W (03690) and JD Group-SW (09618, JD.US) will occupy the remaining 50% and 10% shares, respectively
