According to a report published by Reuters, Alibaba Group Holding Ltd. (BABA) is planning to reorganize its domestic and international E-commerce businesses to boost growth amid a regulatory crackdown, slowing economy and increasing competition. The tech giant’s shares gained 10.4% on Monday to close at $123.60.
The company offers consumer-to-consumer, business-to-consumer, and business-to-business sales services. It also provides electronic payment services, shopping search engines and cloud computing services.
Reorganization Plans
Alibaba plans to break its E-commerce business into two units — China digital commerce and international digital commerce. (See Insiders’ Hot Stocks on TipRanks)
Led by Jiang Fan, who had been in charge of Chinese retail marketplaces, the international unit will include Alibaba.com, AliExpress and Southeast Asian E-commerce business Lazada.
Further, Trudy Dai will lead the China digital commerce unit, which will include Taobao and Tmall. Earlier, Dai was overseeing several of the Chinese firm’s platforms.
The reorganization is in line with Alibaba’s aim to focus on globalization, along with domestic consumer spending and cloud computing.
Analyst Comments
Commenting on the company’s plans, Hong Kong-based investment banking firm Guotai Junan analyst Danny Law said, “Globalization helps Alibaba to get new traffic volume externally (and) seek new growth potential while China has been increasing supervision.”
Additionally, China-based 86research.com analyst Xiaoyan Wang said, “The new structure for domestic E-commerce puts Dai in charge of all China retail marketplaces, including Taocaicai – its community E-commerce service, Taobao Deals as well as Lingshoutong, a retail management platform for mom and pop stores.”
“This could possibly unlock more synergies via cross-selling and integration of supply chain,” Wang added.
Wall Street’s Take
Last month, Goldman Sachs (GS) analyst Piyush Mubayi reiterated a Buy rating on the stock but reduced the price target from $252 to $215 (74% upside potential).
The analyst said, “Alibaba has been increasing its investments on both defensive-offensive strategies amid slowing retail spending and budding competition to acquire new users, build multiple traffic sources, and in the shorter term, raise merchant subsidies to retain merchants.”
Mubayi expects the company’s revenue growth to slow down to 13% in the third quarter of Fiscal Year 2022 and 16% in the fourth quarter. He also anticipates Alibaba to revise its investment portfolio and continue with the share buybacks.
Overall, the stock has a Strong Buy consensus rating based on 21 Buys and 2 Holds. The average Alibaba Group Holding price target of $212.48 implies around 72% upside potential. Shares have lost 53.2% over the past year.
Website Traffic
TipRanks’ Website Traffic Tool, which uses data from SEMrush Holdings (SEMR), the world’s biggest website usage monitoring service, offers insight into Alibaba’s performance.
According to the tool, compared to the previous year, the company’s website traffic registered a nearly 5% increase in global visits in October. Moreover, the website traffic has gone up 3.5% year-to-date against the same period last year.
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