Is Alibaba's Logistics Strategy a Long-Term Win?
The wide-moat firm's recent logistics investment may weigh on near-term margins, but it will create fulfillment and inventory storage bundling opportunities, which should drive improved monetization rates.
We view positively
We estimate that Cainiao will benefit second-half revenue by roughly CNY 7 billion (which will bring our full-year revenue outlook to CNY 243 billion, putting the company ahead of its 2018 revenue growth forecast of 45%-49%) but will have a negative impact on operating income by CNY 2 billion, resulting in a CNY 1 billion net income hit after factoring in Cainiao's other equity partners. We plan to raise our fair value estimate to $185 per ADS from $175 based on new fulfillment opportunities with domestic and international merchants and greater China retail monetization rate assumptions (pushing 5% by fiscal 2027), partly tempered by lower adjusted EBITDA margins (mid-40s in fiscal 2027 versus previous high-40s assumptions).
Morningstar Premium Members gain exclusive access to our full analyst reports, including fair value estimates, bull and bear breakdowns, and risk analyses. Not a Premium Member? Get this and other reports immediately when you try Morningstar Premium free for 14 days.
United States