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Alibaba Group Holding Ltd ADR BABA

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Morningstar’s Analysis

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Affirming Our USD 188/HKD 182 Alibaba FVE; Revised Near-Term Outlook Due to Weak Macroeconomics

Chelsey Tam Senior Equity Analyst

Analyst Note

| Chelsey Tam |

We fine-tuned our estimates for wide-moat Alibaba’s fiscal 2022 China retail gross merchandise volume growth, revenue growth and adjusted EBITA down by 300 basis points to 7%, by 370 basis points to 20% and by 2.3% to CNY 142 billion, respectively, due to weak macroeconomics and competition. These changes were offset by the increase in fair value estimate after rolling our model, so we are maintaining our USD 188/HKD 182 fair value estimate. We anticipate an economic recovery resulting from loosened monetary policies (for example, the reserve requirement ratio cut and flexible monetary policies vowed by the People's Bank of China) and fiscal policies (for example, tax cuts, fees reduction, infrastructure spending, and transfers to local governments from the central government) in calendar 2022. These will help recovery in fiscal 2023, which ends March 2023, explaining our 22% revenue growth forecast. We continue to believe that wide-moat Alibaba is materially undervalued.

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Company Profile

Business Description

Alibaba is the world’s largest online and mobile commerce company as measured by gross merchandise volume (CNY 7.5 trillion for the fiscal year ended March 2021). It operates China’s online marketplaces, including Taobao (consumer-to-consumer) and Tmall (business-to-consumer). Alibaba's China commerce retail division accounted for 63% of revenue in the September 2021 quarter. Additional revenue sources include China commerce wholesale (2%), international retail/wholesale marketplaces (5%/2%), cloud computing (10%), digital media and entertainment platforms (4%), Cainiao logistics services (5%), and innovation initiatives/other (1%).

969 West Wen Yi Road, Yu Hang District
Hangzhou, 311121, China, People's Republic of
T +86 57185022088
Sector Consumer Cyclical
Industry Internet Retail
Most Recent Earnings Sep 30, 2021
Fiscal Year End Mar 31, 2022
Stock Type
Employees 258,578