Citi Drops BABA-SW (09988.HK) TP to $144, Rating Buy
Citi Research issued a report on $BABA-W (09988.HK)$ , noting that it has logged better-than-expected results for 1FQ24 ended June. Amid weak macro and retail data trends in July and August, customer management revenue (CMR) is now forecasted to grow 3% YoY to RMB68.5 billion in 2FQ24 ended September. Overall revenue is expected to lift 7.5% YoY to RMB222.6 billion.
Taking into account BABA's continued investment in user engagement and technological innovation, Citi forecasted Taobao Tmall Group's EBITA to grow by 2% YoY in 2FQ, while its consolidated Adjusted EBITA is expected to hike by 17%.
Looking ahead to 3FQ24, with the "Double Eleven" seasonal peak season and strengthened cooperation with WeChat, Citi expected the growth in daily active users to positively drive conversion rates and cause CMR growth to outpace the growth in total platform gross merchandise value.
Citi lowered its 2FQ24 revenue and non-GAAP net profit forecasts for BABA by 4.5% and 10.5% respectively to reflect slower CMR and direct sales growth.
Correspondingly, Citi trimmed its target price for $BABA-W (09988.HK)$ to HK$144, maintaining a Buy rating as valuation is not high.
For FY2024 to FY2026, Citi dropped its revenue forecast by 2.8%, 3.7% and 3.8% respectively, and reduced its non-GAAP net profit forecast by 6.5%, 7.6% and 8.7% respectively.
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