Alibaba’s Restructuring Plan Could Double Stock Prices, Says Morgan Stanley

Alibaba’s depositary receipts are undervalued and trading at a discount compared to their sum-of-the-parts valuation, according to Morgan Stanley analysts. With the restructuring plan set to unlock the company’s value, the bank expects Alibaba’s stock prices to double. Other analysts also predict positive growth for the company, with an uptick in customer management revenue and China’s reopening acting as potential catalysts. Overall, Alibaba is poised for strong growth and potential gains for investors in the coming months.

Alibaba Group Holding Ltd, the Chinese e-commerce giant, has recently announced the restructuring of its business into six independent business groups. Each group will have its own CEO and board of directors, allowing them to independently raise funds and conduct an IPO, with the exception of one unit, which will remain wholly owned by Alibaba. Morgan Stanley, an American multinational investment bank, is optimistic about this restructuring and expects the company’s stock prices to double. The bank believes that Alibaba’s depositary receipts (BABA) are trading at a significant discount to their valuation by the sum of the parts, which means that the cost of non-core destinations is not included in the price. According to experts, the papers are the best choice among Chinese technology stocks due to a gradual recovery in consumption in China and a potential catalyst for growth in the form of corporate restructuring. Morgan Stanley analysts have issued a Research Tactical Idea call on Alibaba shares as the short-term valuation has become much more compelling. The bank has an Overweight rating and a $150 per share price target on the stock. They believe that the share price will rise in absolute terms over the next 60 days due to an inflection in customer management revenue on the back of consumption recovery in China and the announcement of corporate restructuring to unlock Alibaba’s value.

Alibaba’s American depositary receipts (BABA) closed up 14% after the announcement of the company’s restructuring plan on Tuesday, March 28th. The shares climbed an additional 1.5% on March 29th, reaching $99.92 per share. According to analysts at Morgan Stanley, Alibaba’s depositary receipts are currently undervalued and trading at a discount compared to their sum-of-the-parts valuation. They believe that the restructuring of the business could unlock this value and boost the company’s share price. Other analysts also predict a positive outlook for Alibaba, with Mizuho raising its price target by 55.19% to $155 and Susquehanna predicting a 75.22% increase to $175. Morgan Stanley believes that two key factors will drive Alibaba’s growth in the coming months: an uptick in customer management revenue (CMR) as the Chinese economy continues to recover from the pandemic, and the market beginning to value the company based on its sum-of-the-parts perspective. The company’s current valuation looks attractive, with a price-to-earnings ratio of just 9x for the 2024 financial year, and an ex-cash P/E of 7.5x. Alibaba is also estimated to be a key beneficiary of China’s reopening, acting as a proxy for inflows from global investors. Overall, analysts predict strong growth and potential gains for investors in the coming months.