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<Research>Nomura Lifts Alibaba (BABA.US) TP to US$215 as Quick Commerce Loss May Peak
Recommend 26 Positive 35 Negative 13 |
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Nomura released a report on BABA-W (09988.HK), of which 2QFY26 may deliver mixed results, with forecast consolidated revenue growing by 4% YoY to RMB246 billion, but consolidated adjusted EBITA sliding 83% to RMB6.7 billion due to upsurge in investments in quick commerce and home-grown large language models (LLM). Alibaba's quick commerce losses should peak in the quarter ending September and may narrow to RMB21 billion in the December quarter, fueled by improved operational efficiency. Alibaba Cloud revenue may grow by 30%, an elevation from the previous quarter's 26% growth. Alibaba Cloud's EBITA margin was anticipated to remain largely stable at around 8.5% QoQ. The AIDC seems to have shifted its focus to improving profit. Due to Alibaba's prioritization of investments in quick commerce and AI in China, AIDC may notably improve its net profit, achieving breakeven for the first time compared to a loss of RMB2.9 billion in the same period last year. Nomura revised down Alibaba's EBITA forecast for FY2026 by 4.7% to account for potentially higher losses in the “all other” segments under elevated LLM investments. The forecast for FY2027 remained largely unchanged; and the Buy rating was upheld. The target price for Alibaba's (BABA.US) US shares was lifted from US$170 to US$215, backed by a higher valuation of Alibaba Cloud. Nomura valued Alibaba Cloud at US$207 billion. AASTOCKS Financial News Website: www.aastocks.com |
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