Mizuho analyst James Lee maintained a Buy rating on Alibaba Group Holding Limited
Lee expects the June quarter top line to reflect a recovery in consumer consumption, with GMV growth at 7.5% YoY, better than the consensus of 4.0% and improving from negative low-single-digits last quarter.
The improving trend is courtesy of BABA's price-parity strategy and a successful 6.18 sales event. GMV growth should remain positive for SepQ at 6% YoY.
The analyst expects merchants' willingness to spend on advertising to improve as GMV growth rebounds. This setup should be positive for BABA as they can save on merchant subsidies.
Also, the normalized logistics and fulfillment should help improve order cancellation.
Lee expects new retail revenues to come in at 69 billion RMB, or 7% YoY growth vs. -1% in the March quarter, roughly in line with the consensus of 7% from the recovery in foot traffic, as consumers return to physical stores such as Sunart and Freshippo.
Driven by the momentum, Freshippo could IPO in Hong Kong by November 2023, triggering a series of IPOs for BABA, as Freshippo and Cainiao are the divisions most prepared for IPO.
Lee predicts China Commerce EBITA of 49 billion RMB, ahead of the consensus of 47 billion, reflecting continued progress on loss reductions across all segments.
The analyst's checks across BABA's international operations show growth and profitability for AliExpress and Trendyol. The segment continues to benefit from a normalizing export situation. BABA could clock revenue growth of 26%, ahead of consensus of 22%.
Like last quarter, Cainiao revenues could track closely with International, motivating expectations for top-line growth at 23% YoY and ahead of the consensus of 20%. Lee's checks indicate a rebound in China exports to be a positive indicator.
The checks also point to Cloud revenue growth of around 5%, roughly in line with consensus as the enterprise demand was not elastic to recent price discounts.
The consolidated EBITA could come around 41 billion RMB (18% EBITA margin for the June quarter), 12 % above expectations.
As the reopening gains momentum, Lee expects the improving macro to lift all boats and catalyze the multiple expansion.
Recent positive news surrounding the completion of Internet industry oversight and IPO of profitable business divisions like Cainiao, Ant Group, and Freshippo would also be positive for unlocking value.
Price Action: BABA shares are trading higher by 1.05% at $95.21 on the last check Wednesday.
