Oct 10, 2018 (China Knowledge) - Investment bank Morgan Stanley reported Tuesday that it has maintained Alibaba Group's <NYSE:BABA> rating under "increase" tag, but cut its target share price by 8% from USD 240 to USD 220 to reflect macro risk, product transformation and lower recent profits from investment. Morgan Stanley expects Alibaba Group’s continuous investing in the new retail ecosystem will help expand its lead with competitors.
Morgan Stanley said that Alibaba was given "increase" rating because of its leading position in e-commerce and cloud computing and its attractive valuations. Hence, with increase of income level and online penetration rate, China's e-commerce growth opportunities are still great.
Alibaba Group's light asset model will provide strong cash flow help to expand its competitive edge. The opportunities of Alipay, international e-commerce and rural e-commerce show that the group has potential advantages in the medium term. Its dominance in a long-growing market, compared with its counterparts in e-commerce, justifies the premium valuation.
Morgan Stanley gave Alibaba Group USD 170 per share for its core business, USD 25 per share for Ali Cloud, and USD 25 per share for strategic investment and profit streams. Combined with the above valuation, Alibaba group's stock price is valued at USD 220 per share.
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