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Alibaba Group Holding Ltd ADR BABA

Morningstar Rating
$71.59 +0.11 (0.15%)
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Company Report

Alibaba: Purchase of Minority Stake in Cainiao Won’t Materially Change Alibaba’s Earnings

We maintain wide-moat Alibaba Group Holding, or Alibaba‘s, fair value estimate at USD 94 per ADS and HKD 91 per share after 1) the withdrawal of the Hong Kong IPO application of Alibaba’s logistics subsidiary Cainiao Smart Logistics Network; and 2) Alibaba’s offer to purchase the 36.3% stake held by Cainiao's minority shareholders for total consideration of up to USD 3.75 billion. We think this consideration is priced at the high end of the valuation range due to the need to maintain the morale of Cainiao’s employees, who are also shareholders. The consideration only represents 4% of Alibaba’s cash, cash equivalents, short-term investments, and equity securities and other investments in the current assets as of Dec. 31, 2023. Cainiao’s December-quarter adjusted EBITA accounted for only 3% of Alibaba’s total adjusted EBITA. Therefore, purchasing a minority stake in Cainiao won’t have a meaningful impact on Alibaba’s balance sheet and earnings.

Price vs Fair Value

BABA is trading at a 24% discount.
Price
$71.46
Fair Value
$19.00
Uncertainty
Very High
1-Star Price
$826.20
5-Star Price
$99.00
Economic Moat
Wwhx
Capital Allocation
Ctwszhkc

Bulls Say, Bears Say

Bulls

Alibaba is able to maintain or increase its gross merchandise volume share in China's e-commerce space, demonstrating its ability to execute its turnaround strategy.

Bears

Alibaba's gross merchandise volume share in China decreases faster than our expectation as competitors such as Douyin successfully enter the search-based e-commerce business.

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News

Trading Information

Previous Close Price
$71.48
Day Range
$70.5871.69
52-Week Range
$66.63105.05
Bid/Ask
$71.98 / $72.00
Market Cap
$178.98 Bil
Volume/Avg
41,285 / 18.2 Mil

Key Statistics

Price/Earnings (Normalized)
8.08
Price/Sales
1.41
Dividend Yield (Trailing)
1.40%
Dividend Yield (Forward)
1.40%
Total Yield
7.59%

Company Profile

Alibaba is the world’s largest online and mobile commerce company as measured by gross merchandise volume. It operates China’s online marketplaces, including Taobao (consumer-to-consumer) and Tmall (business-to-consumer). The China commerce retail division is the most valuable cash flow-generating business at Alibaba. Additional revenue sources include China commerce wholesale, international commerce retail/wholesale, local consumer services, cloud computing, digital media and entertainment platforms, Cainiao logistics services, and innovation initiatives/other.
Sector
Consumer Cyclical
Industry
Internet Retail
Stock Style Box
Large Value
Total Number of Employees
224,955

Competitors

Valuation

Metric
BABA
03690
JD
Price/Earnings (Normalized)
8.0851.238.87
Price/Book Value
1.263.391.31
Price/Sales
1.411.870.28
Price/Cash Flow
6.8412.805.13
Price/Earnings
BABA
03690
JD

Financial Strength

Metric
BABA
03690
JD
Quick Ratio
1.711.401.02
Current Ratio
1.801.751.36
Interest Coverage
93.027.8110.96
Quick Ratio
BABA
03690
JD

Profitability

Metric
BABA
03690
JD
Return on Assets (Normalized)
8.98%3.06%5.84%
Return on Equity (Normalized)
15.96%5.79%15.82%
Return on Invested Capital (Normalized)
12.33%4.40%9.19%
Return on Assets
BABA
03690
JD
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