The Zhitong Finance App learned that Bank of America Securities released a research report stating that it reaffirmed Alibaba's (09988, BABA.US) “buy” rating, and that the target prices for Hong Kong stocks and US stocks remained unchanged at HK$168 and $172.
The report predicts that Alibaba's revenue for the first fiscal quarter ending the end of June this year will increase 8.8% year on year, in line with market expectations. Strong AI demand is expected to drive a 45% year-on-year increase in cloud business revenue, compared with a 38% increase in the previous quarter. The profit margin of the cloud business is expected to improve from 9% to 11%, in line with management guidelines.
The bank expects Ali's CMR to drop 7.7% year-on-year this season, reflecting the weak industry environment in the second quarter of this year. The overall EBITA forecast reached about RMB 26.2 billion, a year-on-year decrease of 33%. Among them, China's e-commerce EBITA (excluding new retail sales) is expected to fall by 3.3% year on year, mainly due to continued results from improved operating efficiency and optimization of marketing expenses. New retail losses narrowed to around RMB 10 billion, compared with losses in the previous quarter to around RMB 18 billion; losses from other businesses narrowed from RMB 21 billion to about RMB 17 billion.
Bank of America Securities believes that the 2027 fiscal year will usher in a key turning point in Ali's profit. Core e-commerce profits will return to growth with a significant narrowing of new retail losses and can provide lasting cash flow to support cloud development and AI investment. It predicts that the overall adjusted EBITA will increase from about 76 billion yuan in fiscal year 2026 to about 103 billion yuan in fiscal year 2027, keeping the revenue forecast for the 2027-2028 fiscal year unchanged. The profit forecast for the 2027-2028 fiscal year will increase by up to 2%.