Alibaba: Strategic Shift To Taobao Puts Pressure on Earnings, but Long-Term Benefits Likely

According to a media report from LatePost on June 19, Alibaba’s management may allocate more resources to Taobao, smaller merchants, and value-for-money products versus Tmall, which houses larger merchants and brands. We believe such a strategy places near-term earnings pressure on Alibaba, but it should boost Alibaba’s long-term competitiveness and supports our wide moat rating. Pending additional details, we maintain our fair value estimate and our earnings forecast for Alibaba is unchanged.