Macquarie: Adjusts Alibaba-W target price to HKD 228.2, indicating that the market's assumptions about Alibaba Cloud's contribution are overly conservative
Macquarie released a research report stating that it expects Alibaba-W's cloud business to continue accelerating growth in the current fiscal year, with more diversified monetization opportunities providing the possibility for long-term margin expansion. The rapid e-commerce summer activities may lead to greater losses, but user traffic and transaction volume trends remain robust. The firm reiterated its outperform rating on Alibaba. Based on the company's position as the best comprehensive technology giant from infrastructure to application layer agents, the target price was lowered from HKD 229.1 to HKD 228.2. The firm also cut its adjusted EBITA forecasts for Alibaba by 24% and 10% for this and next fiscal year, reflecting the company's spending on rapid e-commerce and artificial intelligence training and inference. However, the firm indicated that with the surge in Chinese enterprises adopting artificial intelligence, cloud demand will be boosted, bringing a compound annual growth rate of 30% to 35% in revenue for Alibaba Cloud over the next few years. Macquarie also believes that the market's current assumption of Alibaba Cloud's valuation contribution being around 15% to 20% is overly conservative compared to Amazon Web Services (AWS), which is widely regarded as accounting for over 50% of Amazon's equity value, indicating further room to narrow the valuation gap with its U.S. peers
According to the Zhitong Finance APP, Macquarie has released a research report stating that it expects Alibaba-W (09988) to continue accelerating growth in its cloud business in the current fiscal year, with more diversified monetization opportunities providing the possibility for long-term margin expansion. The rapid e-commerce summer campaign may lead to greater losses, but user traffic and transaction volume trends remain robust. The firm reiterated its outperform rating on Alibaba. Based on the company's position as the best comprehensive technology giant from infrastructure to application layer, the target price has been lowered from HKD 229.1 to HKD 228.2.
The firm has reduced its adjusted EBITA forecasts for Alibaba by 24% and 10% for the current and next fiscal years, reflecting the company's spending on rapid e-commerce and artificial intelligence training and inference. However, the firm indicated that as Chinese companies rapidly adopt artificial intelligence, cloud demand will be boosted, bringing a compound annual growth rate of 30% to 35% in revenue for Alibaba Cloud over the next few years.
Macquarie also believes that the market's current assumption of a valuation contribution of about 15% to 20% for Alibaba Cloud, compared to the widely recognized 50% or more for Amazon Web Services (AWS), is overly conservative, indicating further room to narrow the valuation gap with U.S. peers
