JP Morgan Reaffirms Alibaba-SW (09988) "Overweight" Rating with a Target Price of 120 Hong Kong Dollars.

JPMorgan released a research report stating that it reiterates its "overweight" rating on Alibaba-SW (09988) with a target price of 120 Hong Kong dollars. It is expected that Alibaba's revenue in the fourth quarter of last year will increase by 8% year-on-year, exceeding market expectations by 1% and relative to a 5% increase in the third quarter. Adjusted net profit is estimated to increase by 14% year-on-year, surpassing market expectations by 15%. The bank believes that with controlled costs, stable market share, and improved monetization, profitability will naturally increase. The bank predicts that Alibaba will show positive developments in the past quarter, including an improvement in the growth of gross merchandise volume (GMV) quarter by quarter, mainly due to strong growth in GMV on Taobao and Tmall during the Double 11 period; accelerated growth in core customer management revenue (CMR) from 2.5% in the third quarter to 6% in the fourth quarter, mainly due to Taobao starting to charge platform sellers a 0.6% basic software service fee since September last year. Adjusted EBITA for Taotian Group is expected to return to positive growth (the bank predicts a 6% increase year-on-year), mainly due to incremental monetization and reasonable investments. However, the bank believes that the visibility of sustained positive growth in adjusted EBITA for Taotian Group in the coming quarters is low, due to the change of CEO or the implementation of different execution policies; extremely competitive market environment; and Alibaba's investment cycle phase (this year is the first year of the three-year investment cycle for Taotian Group) shows that the current focus is more on GMV and CMR rather than profitability.