Jefferies: Slightly raises BABA-W (09988) target price to HK$186, expects solid performance across businesses in the second fiscal quarter.

Jefferies issued a research report predicting solid performance across BABA-W's (09988) business segments for the second fiscal quarter ended September 30 this year; the firm maintains its "Buy" rating on Alibaba, raising its Hong Kong stock target price from HK$186 to HK$186 and its US stock (BABA.US) target price from US$190 to US$192. The firm estimates that total revenue for the second fiscal quarter will grow 9.6% year-on-year, in line with market expectations, with AI cloud and computing power services revenue expected to grow over 50% year-on-year to RMB 60.5 billion, better than market expectations of 48% growth, and segment margin expected to improve quarter-on-quarter to 12.3%; it also expects cloud revenue year-on-year growth to accelerate in the third and fourth fiscal quarters, with cloud revenue year-on-year growth potentially exceeding 50% in fiscal year 2028 ending March 2028. The firm estimates that Alibaba's AI laboratory and applications revenue will grow 20% year-on-year to RMB 3.6 billion, with segment losses narrowing quarter-on-quarter to RMB 10.9 billion, better than market expectations of a RMB 12.3 billion loss, and expects that in the third fiscal quarter ending December this year, the AI cloud and computing power services segment EBITA can offset AI laboratory and applications losses. On the e-commerce business front, Jefferies estimates that CMR net amount will decline 5% year-on-year to RMB 75 billion, instant retail losses will narrow quarter-on-quarter to approximately RMB 9.8 billion, with overall EBITA expected to reach RMB 30.4 billion, above market expectations of RMB 26.7 billion.