VALUATION HIGHLIGHTS
- Taobao and Tmall Group constitutes 28% of the Trefis price estimate for Alibaba Group's stock.
- Other Business constitute 17% of the Trefis price estimate for Alibaba Group's stock.
- Cloud Computing constitutes 7% of the Trefis price estimate for Alibaba Group's stock.
WHAT HAS CHANGED?
- Latest Earnings
Alibaba posted a mixed set of Q1 FY'25 results, with earnings coming in at $2.26 per share, down 5% compared to last year, while revenues rose about 4% to $33.50 billion. The company benefited from higher sales in the cloud business and market share gains in the e-commerce business in international markets.
Note:FY'24 ended on March 31, 2024. Q1 FY'25 ended on June 30 2024
- Alibaba scraps spin-off of the cloud business
In November 2023, Alibaba announced that it would be scrapping its plans to spin off its cloud unit, citing that the recent expansion of U.S. restrictions on the export of advanced semiconductor chips was hurting the business. The spin-off was intended to unlock value for investors given that the Cloud segment included the cloud computing and artificial intelligence business, two high-profile and growing businesses. Moreover, the cloud spin-off was seen as a significant step toward Alibaba’s restructuring of itself into a holding company via IPOs for its business groups (including e-commerce, media, food delivery, and logistics), in a move that could unlock value. The U-turn on the cloud spin-off indicates that things may not go as expected.
BUSINESS SUMMARY
Alibaba is a Chinese technology company focusing on e-commerce, logistics, cloud computing, digital media, and other subscription software. While the company reports its business in four segments, we have reworked its structure into five segments that better capture Alibaba's business based on its operations. The China Commerce segment revenues are derived from retail e-commerce and associated marketing services in China. Digital Media & Innovation Initiatives segment revenues are derived from content subscription, software subscription, and merchant advertising offerings. China Wholesale & Other revenues are derived from wholesale commerce and logistics services, primarily driven by Chinese consumption. International Commerce segment revenues are derived from retail and wholesale operations and advertising services outside China. Cloud Computing segment revenues are derived based on customers' duration and usage of Alibaba's service.
