Alibaba is planning to raise as much as $8 billion by selling US dollar-denominated bonds as early as next week, according to reports by Reuters and Bloomberg. Shares declined 1.7% in Wednesday's pre-market session.
The e-commerce giant seeks to tap at least $5 billion from international debt markets through a multi-tranche offering but could increase its bid depending on demand, Bloomberg and Reuters have learnt. The tenure is likely to be 10 years, while marketing documents were planned to be available as soon as next week, Reuters reported.
The debt offering, should it go ahead, is likely to be watched closely and could be seen as a test of confidence in Alibaba (BABA), which has been facing regulatory scrutiny. Back at home, Chinese officials have been hard on Alibaba’s businesses, suspending Ant Group’s $37 billion initial public offering and introducing new regulations to clamp down on anticompetitive behavior of internet companies.
What’s more, amidst all this regulatory havoc, Jack Ma, Alibaba’s billionaire founder has reportedly disappeared, and hasn’t been seen in public for more than two months, which does not add to investor sentiment.
The Chinese e-commerce giant has served investors well during the coronavirus pandemic as stay-at-home mandates and the work-at-home trend forced more and more people to shop online and change their purchase preferences. (See Alibaba stock analysis on TipRanks).
However, the stock has shed almost 20% over the past three months amid investor concern that anti-monopoly guidelines drafted by China’s market regulators could have a negative impact on the e-commerce giant’s operations.
Meanwhile, Truist analyst Youssef Squali remains a big fan of BABA, while he also cautions that the regulatory issues do present a “key risk for the stock in 2021.” Bottom-line though, Squali maintains a Buy rating on the stock and a $308 price target (28% upside potential).
“Regulators are likely to use BABA as a way to regulate the online industry as a whole,” the analyst wrote in a note to investors. “While altering BABA’s business practices may be negative for the company short-term, we believe that consumers and merchants, if given a choice, will always gravitate toward the largest marketplaces with the most liquidity.”
Turning to other Wall Street analysts, the bulls have it. The Strong Buy consensus boasts 20 unanimous Buy ratings. That’s with an average price target of $342.07, indicating that a promising 42% upside potential lies ahead.
Related News:
Moderna’s Covid-19 Vaccine Gets Green Light From Israel; Shares Gain
McDonald’s Craves a Larger Share Of the Chicken Sandwich Market – Report
ATN To Take Alaska Private In $332M Deal; Raymond James Sticks To Buy
Alibaba has put an end to its ambitions of breaking into China’s entertainment industry and will be shutting down its Xiami Music app on February 5, according to CNN Business.
Alibaba (BABA) bought Xiami in 2013, hoping to establish itself as a leader in China’s music and entertainment market, however, CNN Business has reported that shortly after the acquisition, Chinese regulators began cracking down on music copyright infringements.
As a result, music streaming services in China were forced to remove more than two million unauthorized songs from their websites and apps over a three-week period in 2015, according to the National Copyright Administration, China's top copyright regulator.
The CNN Business report acknowledges that Alibaba also faced tough competition from entertainment giant Tencent Holdings, who established its own music entertainment division with popular streaming platforms Kugou Music, QQ Music and Kuwo Music.
According to data intelligence company, TalkingData, headquartered in Beijing, CNN Business has discovered that Xiami currently only owns around 2% of China's music streaming market.
Alibaba is once again facing regulatory challenges as its affiliate, Ant Group, is now facing a Chinese antitrust investigation and has been ordered by regulators to overhaul large parts of its operations.
Meanwhile, Jack Ma, Alibaba’s billionaire founder has reportedly disappeared, and hasn’t been seen in public for more than two months. (See BABA stock analysis on TipRanks)
Oppenheimer analyst Jason Helfstein assigned a Buy rating on the BABA stock 2 days ago and lowered his price target from $330 to $320. This implies upside potential of around 38%.
Helfstein reduced price target after Chinese regulators imposed five regulatory requirements on the company, which effectively lower Helfstein’s valuation of Ant Group from $200 billion to $150 billion. He also believes that the planned IPO of Ant Group now seems unlikely to go ahead in 2021.
Overall, consensus among analysts is a Strong Buy with all 19 analysts who have offered a rating on the stock in the past three months recommending a Buy. The average price target of $342.07 suggests upside potential of around 46% over the next 12 months.
Related News:
Moderna’s Covid-19 Vaccine Gets Green Light From Israel; Shares Gain
McDonald’s Craves a Larger Share Of the Chicken Sandwich Market – Report
ATN To Take Alaska Private In $332M Deal; Raymond James Sticks To Buy
2020 is gone and with 2021 at play, it’s out with the old and in with the new. However, for Alibaba (BABA) the well-worn axiom could yet have a whole new meaning, and might be interpreted as out with the old rules, in with the new regulations.
Shares had been under pressure in last year’s final stretch as the Chinese government announced it is investigating the e-commerce giant based on allegations the company is attempting to monopolize the market by coercing merchants to sign exclusivity agreements – thereby stifling competition.
The latest move followed an earlier crackdown, when the Chinese government put the brakes on Ant Financial’s (Alibaba’s sister company) planned record-breaking November IPO.
The regulators have now made a list of requirements which Ant must follow, so the IPO can get the go ahead. These include improving transactions' transparency and encouraging fair competition, setting up a regulated holding company for Ant’s financial services, procuring the required licenses for the individual credit rating business, polishing up on company governance, and a requirement for the asset securitization businesses to correct irregularities.
Oppenheimer analyst Jason Helfstein says the list suggests the “IPO seems unlikely in 2021.”
“It will likely take Ant some time to meet all five regulatory requirements (especially reserve capital requirement) and another one year or more to get ready for an IPO again,” the 5-star analyst opined. “In our view, Ant will focus on Digital Payments, while the growth of its consumer credit business (+59% y/y in 1H:20) should decelerate given the new capital requirement.”
As a result, Helfstein lowered Ant’s valuation from $200 billion to $150 billion.
Overall, the analyst believes BABA shares are “undervalued.” The analyst reiterates an Outperform (i.e. Buy) rating on BABA along with a $320 price target. Investors stand to pocket a 40% gain should the analyst’s thesis play out. (To watch Helfstein’s track record, click here)
The Oppenheimer analyst is not alone in claiming BABA remains undervalued. The overall sentiment is decidedly bullish; all current ratings - 19, in total - consider the stock a Buy. To this end, BABA's Strong Buy consensus rating is backed by a $342.07 average price target, suggesting gains of 50% over the next 12 months. (See Alibaba stock analysis on TipRanks)
To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.
Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.