Alibaba sees Buy rating maintained but price target cut at Jefferies ahead of earnings

Jefferies maintained its Buy rating on Alibaba (NYSE:BABA) but lowered the price target on the stock to $150 from $153 ahead of the Chinese tech and e-commerce giant’s quarterly results next month.

Analysts led by Thomas Chong provided a preview of Alibaba’s June-quarter results. The analysts believe the market has formed expectations for investment in instant commerce. They added that in the June quarter, solid momentum was seen across segments.

For Taobao Tmall Group, or TTG, the analysts estimate Customer-to-Merchant Revenue, or CMR, outpaced Gross Merchandise Value, or GMV, growth. Fast growth is seen in daily order volume for Taobao Instant Commerce and Eleme, according to the analysts.

Accelerating Cloud revenue growth is expected due to solid AI demand, the analysts noted. Alibaba International Digital Commerce Group’s, or AIDC, losses continue to narrow. The analysts said they factor in the decline in overall EBITA from investment in instant commerce.

The analysts said they believe the market has formed expectations on investment in instant commerce given recent industry developments. For the June quarter, they estimate total revenue growth of 4% year-over-year (versus consensus of 5% year-over-year, and unchanged compared to Jefferies’ prior estimate) to RMB252b.

Taobao Tmall Group integrates local service Eleme and OTA Fliggy with China ecommerce to align strategies and execution. The analysts expect CMR to rise about 10.5% year-over-year (versus Jefferies’ prior estimate of 10% year-over-year) and expect CMR to outpace GMV growth.

Chong and his team estimate Cloud Intelligent Group revenue growth of 23% year-over-year (versus consensus and Jefferies’ prior estimates of 20% year-over-year), thanks to solid demand for AI.

For AIDC, the analysts estimate quarterly loss of RMB2.1B (versus consensus at about (RMB2.3B) and Jefferies’ prior estimate of (RMB2.7B).