Investment banking firm Jefferies Group has increased its stock rating for Chinese e-commerce giant Alibaba Group Holding Ltd. (NYSE: BABA) from $116 to $142 and maintained a Buy rating for Alibaba’s shares. According to Jefferies’ analysis, Alibaba and other players in the e-commerce industry are often subject to critical events that shift how valuation is approached, and this results in re-evaluations. As such, recently passed policies signal the potential for recovery for the e-commerce industry after several months of poor performance.
Jefferies’ new stock valuation for Alibaba was based on projections for next year. The Chinese company has become a major player in the online trade market through its various subsidiaries and is now competing with leading e-commerce companies, including Amazon. Alibaba’s extended forays into the technology space have made it one of the top cloud-storage providers on the globe, and it is now using generative artificial intelligence (AI) to improve its cloud-service delivery.
Jefferies identified Alibaba as one of several companies that were “potentially undervalued,” especially when compared to its overseas competitors. However, the banking investment company leverages forward-looking strategies when it values companies, and this provided it with a better outlook of Alibaba’s financial performance in the future.
The decision to raise Alibaba’s stock rating to $142 indicates Jefferies’ increased conviction in the future growth prospects of Alibaba as it came from the investment banking company’s analysis of the e-commerce industry and how Alibaba has positioned itself within the sector. With a total reported revenue of RMB 243 billion ($34.6 billion), Alibaba fell just short of reaching the RMB 250 billion ($35.6 billion) market consensus but still surpassed gross profit projections by RMB 97.1 billion ($13.8 billion).
This resulted in analysts from companies such as Jefferies, Truist Securities, JPMorgan, Bernstein SocGen Group, Baird and Susquehanna adjusting their price targets for the Chinese e-commerce giant. JPMorgan kept an Overweight rating for Alibaba as it expects improvements in gross merchandise volume, traffic and the monetization of critical Alibaba platforms Tmall and Taobao.
Jefferies, on the other hand, acknowledged that Alibaba had successfully completed a three-year rectification process recognized by the Chinese State Administration for Market Regulation and maintained its Buy rating.
This is good news for Alibaba as the company recently unveiled an artificial intelligence-powered sourcing agent as well as new logistics and financial solutions to increase efficiency for small and medium-sized companies. In the meantime, experts expect Alibaba Cloud’s external customer growth to hit double digits in the fiscal year’s second half as Alibaba Group’s loss-making enterprises hit its break-even point in the next year or two.
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