Morningstar today published further analysis on Alibaba, ahead of its long-awaited initial public offering which is expected to price today and trading set to begin tomorrow. In Morningstar’s view, Alibaba's current pricing range of between $66 and $68 per American depository share (ADS) is conservative and the valuation does not fully reflect the features that make the wide-moat Alibaba investment story unique.
Morningstar analysts have assigned Alibaba an initial fair value estimate of $90 per ADS, which implies an enterprise value of CNY 1,329 billion ($214 billion) and an equity value of CNY 1,387 billion ($224 billion).
Key takeaways of the report include:
- Alibaba retains wide moat and stable moat trend ratings. Its recent top-line growth trends have been supported by an increase in the number of active buyers and sellers, supporting the network effect underpinning a wide moat rating. Structural differences in China's retail industry and Alibaba's mobile investments will protect its network effect, even as China moves from a consumer-to-consumer to a business-to-consumer e-commerce market, resulting in a stable moat trend.
- The initial fair value estimate of $90 per ADS is based on a revenue CAGR of 32% and operating margins expanding to 50.2% from 47.5% over the next five years. Top-line assumptions are due to several macroeconomic, socioeconomic, regulatory, and industry growth drivers, while a scalable third-party platform should allow Alibaba to generate margins well ahead of its peers.
- Alibaba has high uncertainty and poor stewardship ratings. Its high uncertainty rating is based on competitive, regulatory, and execution risks, while its poor stewardship rating balances management's solid execution with concerns about its variable interest entity (VIE) structure, partnership committee, and Alipay transference.
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Morningstars initiale dækning af Alibaba er tilgængelig på vores hjemmeside. Analysen kan hentes her.
Ved spørgsmål om Morningstars vurdering af Alibaba, kontakt os venligst på telefon +45 3318 6010 eller e-mail info@morningstar.dk.