BofA Securities: Reiterates "Buy" rating on BABA-W (09988) with a target price of HK$168.

Bank of America securities released a research report stating that it reiterates a "buy" rating for Alibaba Group Holding Limited Sponsored ADR (09988, BABA.US), with a target price of HK$168 and US$172 for Hong Kong and US stocks, respectively, unchanged. The report predicts that Alibaba Group Holding Limited Sponsored ADR's revenue for the first quarter ending June this year will increase by 8.8% year-on-year, in line with market expectations. Strong AI demand is expected to drive cloud business revenue to increase by 45% year-on-year, compared to 38% growth in the previous quarter. The cloud business profit margin is expected to improve from 9% to 11%, in line with management guidance. The bank expects Alibaba's CMR to decline by 7.7% year-on-year this quarter, reflecting a soft industry environment in the second quarter of this year. The overall EBITA forecast is expected to reach approximately RMB 26.2 billion, a 33% decrease year-on-year. Chinese e-commerce EBITA (excluding new retail) is expected to decline by 3.3% year-on-year, mainly due to continued improvement in operational efficiency and optimization of marketing expenditures. The loss in new retail is expected to narrow to approximately RMB 10 billion, compared to a loss of approximately RMB 18 billion in the previous quarter; losses in other businesses are expected to decrease from RMB 21 billion to approximately RMB 17 billion. Bank of America Securities believes that the 2027 fiscal year will mark a key turning point for Alibaba's profitability, with core e-commerce profits returning to growth under significant narrowing of losses in new retail, providing lasting cash flow to support cloud development and AI investment. It is predicted that overall adjusted EBITA will increase from approximately RMB 76 billion in the 2026 fiscal year to approximately RMB 103 billion in the 2027 fiscal year, while revenue forecasts for the 2027 to 2028 fiscal years remain largely unchanged, with profit forecasts for the 2027 to 2028 fiscal years increasing by up to 2%.