Alibaba: net cash with earnings growth. Why single-digit forward PE?
Alibaba, since hitting a post-result intraday high of HKD97.95 on 11 Aug, has slumped 14.9% to close HKD83.40 on 10 Oct. At HKD83.40, Alibaba trades at 9.3x FY24F and 8.5x FY25F PE. Its financial year ends in Mar.
All in, it looks pretty positive. Why did Alibaba slump 14.9 since 11 Aug and single digit forward PEs?
Some possible reasons are:
a) Abrupt change in leadership
b) Alibaba's delays its Freshippo IPO
c) Hongkong market is generally weak
Interesting points:
a) Analysts are generally positive on Alibaba; tp HKD136.12
b) Solid balance sheet; USD58 b net cash gives it flexibility for share buyback
c) Trades at attractive valuations
d) Value unlocking through six-way split; Cainiao to be the first to list
e) Cloud intelligence unit eyes fundraising ahead of its potential listing in May 2024
f) Cloud intelligence unit annual Aspara Conference to be held on 31 Oct – 2 Nov
g) Singles' Day may be a potential catalyst
Risks
a) Weak China economy resulting in weaker than expected domestic consumption.
b) Delay in spin offs or poor reception or lacklustre performance on their spin offs post listings.
c) Geopolitical and regulatory risks
d) Traders expect volatility in share price in the next XX months
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