Analyst Note
| Chelsey Tam |As a result of lower-than-expected delivery capacity due to COVID-19 disruptions during wide-moat Alibaba's December quarter, we have lowered our forecasts to 1.8% for the quarter's year-on-year revenue growth from our previous expectation of 4.8% (Refinitiv consensus of 2.0% as of Jan. 9); to 4.9% for the quarter's adjusted EBITA growth from 23%; (Refinitiv consensus of 5.0%); and to 9.1% for fiscal 2023 adjusted EBITA year-on-year growth from 10.1% (Refinitiv consensus of 9.5%). Despite that, we think management’s outlook on reopening is more important for short-term stock performance than fourth-quarter results. We have lowered our fair value estimate to USD 177 per ADS from USD 179 and to HKD 171 per share from HKD 173. There is 60% upside to our new valuation as at the close of business on Jan. 9. The rapid removal of China’s zero-COVID policies, improving sentiment toward internet stocks following the progress made in Ant Group’s potential IPO, and the government’s more positive rhetoric toward platform companies like Alibaba are the positive catalysts to the share price of Alibaba.