Analyst Note| Chelsey Tam |
We focus our key takeaways from the first day of Alibaba’s three-day investor event on the China commerce retail segment, which accounted for 66% of revenue in the quarter ended June. The main takeaway is that the Taobao app’s first page will be transformed into a more feed-driven format, which we think will enhance delivery of more customized content to users and increase monetization potentially in the longer term. The horizontal display ad on the top of the first page will be replaced with horizontal feeds. It was reported by Late Post on Sept. 14 that horizontal display ads have been seeing reduced monetization in the industry. Feeds can host diversified content such as the popular livestreaming and short video formats, as well as key messages that Alibaba wants to convey, such as the CNY 10 billion subsidy program; therefore, we view the transformation of the first page as positive. Alibaba reported page views from recommendation feeds grew at a robust rate of 30% compared with the year-ago period in the June quarter. Short video views were up over 800% year over year for the quarter ended June 30. We retain our forecasts and fair value estimate of USD 272/HKD 264 for Alibaba. The shares now appear fairly valued.