On Wednesday, Morgan Stanley (NYSE:MS) maintained its Equalweight rating on Alibaba (NYSE: NYSE:BABA) with a steady price target of $105.00. Currently trading at $87.15, Alibaba appears undervalued according to InvestingPro analysis, with analysts maintaining a strong buy consensus rating of 1.51 out of 5.
The decision comes after Alibaba's announcement on December 17 that it would divest a roughly 99% equity interest in Intime, a leading department store operator in China, to a consortium comprising Youngor Group and the management team of Intime. An additional minority shareholder, holding about 1% interest, is also part of the sale.
The transaction is expected to yield Alibaba gross proceeds of approximately RMB 7.4 billion (US$1 billion), though it will also result in an accounting loss of RMB 9.3 billion (US$1.3 billion).
Morgan Stanley views this move as aligned with Alibaba's strategy to concentrate on its core businesses, which include Taobao, Tmall, Alibaba Cloud, and AIDC, while potentially divesting from offline retail ventures. The company, currently valued at $197.65 billion, maintains a strong financial health score of "GOOD" on InvestingPro, with robust metrics including a 38.2% gross profit margin and healthy current ratio of 1.37.
The anticipated loss from the sale of Intime is not expected to shock the market, as the decline in asset value had been previously acknowledged. Moreover, the loss is characterized as non-cash and nonrecurring, and is likely to be adjusted for in non-GAAP financial metrics. Morgan Stanley suggests that the proceeds from the sale could contribute to potential special dividends by the end of the fiscal year, mirroring Alibaba's actions from the previous year.
For detailed analysis and more insights, access the comprehensive Pro Research Report available on InvestingPro, which covers Alibaba's strategic moves and financial outlook in depth.
In other recent news, Alibaba Group Holding Limited reported a 5% year-over-year increase in consolidated revenue during its Q3 2024 earnings call, amounting to RMB 236.5 billion.
Despite a significant 70% decrease in free cash flow due to investments in cloud infrastructure, the company maintains a positive outlook on its AI-driven strategy and future growth prospects. Alibaba also announced the formation of a new e-commerce business group, aiming to consolidate its operations and improve efficiency.
On the analyst front, Citi has sustained its Buy rating on Alibaba, citing the potential benefits of this strategic move. Mizuho (NYSE:MFG) maintained its Outperform rating, highlighting positive indicators such as double-digit order growth and increased purchase frequency. Benchmark reaffirmed its Buy rating, acknowledging Alibaba's strategic moves, while Morgan Stanley adjusted Alibaba's financial outlook, reducing the price target due to anticipated market share loss.
Lastly, Susquehanna sustained a positive stance on Alibaba, citing the company's strong position within the Chinese e-commerce market and its significant growth potential.
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