Group 1: Coatue Management and Nvidia - Coatue Management's billionaire investor, Philippe Laffont, has significantly reduced his fund's stake in Nvidia, selling 83% of his position over eight quarters [5][6][11] - Nvidia's stock has seen a dramatic increase, with shares rising more than twelvefold since the start of 2023, prompting profit-taking by Laffont [6] - Concerns about Nvidia include potential competition in the AI-GPU space and a high price-to-sales (P/S) ratio exceeding 30, which is historically indicative of a peak for megacap companies [7][10][11] Group 2: Alibaba Group - In contrast to Nvidia, Laffont has aggressively increased his stake in Alibaba Group, growing from 192,728 shares to 3,801,703 shares in a short period [12][13] - Alibaba's e-commerce operations are foundational to its cash flow, with platforms Taobao and Tmall holding a 41% share of China's e-commerce market, indicating strong growth potential [14] - Alibaba Cloud leads the market with a 33% share of Mainland China's cloud infrastructure service spending, and the company is integrating generative AI solutions to enhance demand and margins [15][16] - The company has a robust capital-return program, ending fiscal 2025 with $51.6 billion in cash and equivalents, allowing for share repurchases and dividends [17] - Alibaba's stock is considered historically inexpensive, trading at an estimated 11 times forward-year earnings, which is lower than its average over the past five years [18]

Core Viewpoint - The article suggests that three industry leaders with strong catalysts and competitive advantages could outperform current AI leaders Nvidia and Palantir over the next decade. Group 1: Nvidia and Palantir - Nvidia has gained over $3.8 trillion in market value since the start of 2023, while Palantir's stock has surged approximately 2,250% during the same period [2] - Nvidia's GPUs, particularly the Hopper and Blackwell models, dominate AI-accelerated data centers, allowing the company to charge a significant premium due to ongoing AI-GPU scarcity [4] - Palantir's platforms, Gotham and Foundry, are essential for federal governments and businesses, driving sales growth and recurring profitability [5] - Both companies may be in a bubble, as historical trends suggest that major innovations often experience bubble-bursting events [6] - Palantir's price-to-sales (P/S) ratio is nearing 121, while Nvidia's is approaching 29, significantly higher than peers [7] Group 2: Potential Competitors - Alibaba Group, with a current market cap of $276 billion, is positioned to potentially surpass Nvidia and Palantir, benefiting from its e-commerce dominance and cloud infrastructure services [10][11] - Alibaba's Taobao and Tmall platforms accounted for an estimated 41% of China's online retail market in 2024, supported by a growing middle class [11] - Alibaba Cloud captured one-third of all cloud infrastructure spending in mainland China, with generative AI solutions expected to drive double-digit sales growth [12] - PayPal Holdings, with a market cap of $71 billion, is also a strong contender, as the global fintech market is projected to grow significantly [14][15] - PayPal's total payment volume increased from $936 billion to an annual run rate of $1.67 trillion, indicating strong engagement from active accounts [16] - Intuitive Surgical, valued at $184 billion, has a stronghold in the robotic-assisted surgical market, with a growing revenue stream from high-margin instruments and services [19][21][22] - The company is expanding its surgical systems' applications, which could sustain double-digit growth for the next decade [23]

Investment Rating - The report maintains an "Overweight" rating for Alibaba Group Holding with a revised price target of US$150, down from US$180, indicating a potential upside of 39% from the current price of US$107.99 [7][5]. Core Insights - The report highlights that Alibaba is facing earnings pressure due to heightened investments in instant commerce, with an estimated Rmb10 billion in investments for the first quarter of fiscal year 2026, leading to a projected 16% year-over-year decline in consolidated EBITA [1][4]. - Despite the near-term earnings challenges, Alibaba is viewed as the best AI enabler in the sector, with cloud revenue expected to grow by 22% year-over-year [3][5]. Summary by Sections Earnings Forecasts - For 1QF26, total consolidated revenue is expected to increase by 2% year-over-year, while adjusted EBITA is projected to decline by 16% due to investments in food delivery and quick commerce [4][12]. - The report anticipates a significant drop in combined EBITA for the Travel and Local Services segments, with a forecasted decline of over 40% year-over-year in the second quarter [2][5]. Revenue and Profit Estimates - Revenue estimates for fiscal year 2026 have been trimmed by 4%, with adjusted EBITA forecasts reduced by 26% for FY26 and 18% for FY27 due to the impact of increased investments [5][13]. - The adjusted net profit attributable to Alibaba is expected to decrease by 23.9% for FY26, reflecting the challenges posed by the current investment strategy [13]. Valuation Methodology - The price target adjustment to US$150 is based on a discounted cash flow (DCF) analysis, with a raised weighted average cost of capital (WACC) to 11% due to increased competitive risks [14][15].

Summary of Alibaba Group Holding Ltd. Conference Call Company Overview - **Company**: Alibaba Group Holding Ltd. (BABA) - **Industry**: China Technology Key Points and Arguments Financial Performance - **Revenue**: Total revenue for March quarter was RMB 236 billion, up 6.6% year-over-year, aligning with estimates [11] - **CMR Revenue**: CMR revenue reached RMB 71 billion, accelerating growth to 11.8% year-over-year [11] - **AIDC Revenue**: AIDC revenue was RMB 34 billion, up 22.3% year-over-year [11] - **Cloud Revenue**: Cloud revenue was RMB 30 billion, with growth accelerating to 17.7% year-over-year [11] - **Gross Profit**: Gross profit was RMB 91 billion, with a gross margin of 38.6%, which was 182 basis points higher than estimates [11] - **Adjusted EBITA**: Group adjusted EBITA was RMB 33 billion with a margin of 13.8%, which was 57 basis points lower than estimates [12] - **Adjusted Net Income**: Adjusted net income was RMB 30 billion, 12.6% lower than estimates [14] Segment Performance - **Taobao and Tmall Group (TTG)**: CMR growth surged to 12% year-over-year, driven by take rate expansion and GMV growth [19] - **Cloud Services**: Cloud revenue growth reached 18% year-over-year, driven by AI cloud services maintaining triple-digit growth for seven consecutive quarters [22] - **AIDC**: AIDC growth decelerated to 22% year-over-year, with a narrowed loss margin of -10.6% [25] Investment and Future Outlook - **AI Investments**: Significant investments in AI are expected to continue, with management believing these are necessary for maintaining leadership in AI [3][24] - **International AIDC Business**: Management reiterated guidance for the loss-making international AIDC business to reach break-even in the upcoming fiscal year [3] - **Shareholder Returns**: BABA returned over $16 billion to shareholders during FY25, including share repurchases and dividends [4][14] Market Position and Valuation - **Price Target**: The price target remains at $180, with a potential upside of 36.7% from the current price of $131.65 [5][62] - **Market Capitalization**: The market cap is approximately USD 314 billion [5] - **Valuation Metrics**: P/E ratio is projected at 14.5 for FY25, decreasing to 11.6 by FY27 [10] Risks and Monitoring - **Cloud Margin Trends**: Future monitoring of cloud margin trends is essential, especially regarding the impact of AI investments [4] - **Ecommerce Expansion**: Potential negative margin impacts from BABA's expansion into the Instacart ecommerce segment should be observed [4] Additional Important Information - **Share Repurchase**: In the March quarter, BABA repurchased 51 million ordinary shares worth $0.6 billion [14] - **Dividend Announcement**: A two-part dividend totaling $2 per ADS, amounting to $4.6 billion, is expected to be paid in July [14] - **Analyst Ratings**: The stock is rated as Overweight, indicating expected outperformance relative to the industry [62] This summary encapsulates the key financial metrics, segment performances, investment strategies, and market outlook for Alibaba Group Holding Ltd. as discussed in the conference call.

Core Insights - Alibaba (BABA) reported non-GAAP earnings of $1.73 per ADS for Q4 fiscal 2025, exceeding the Zacks Consensus Estimate by 16.89% and showing a year-over-year increase of 23% in domestic currency [1] - The company's Q4 fiscal 2025 revenues reached $32.6 billion, slightly missing the Zacks Consensus Estimate by 1.49%, with a year-over-year growth of 7% in domestic currency [1][2] Revenue Breakdown - The increase in revenue was primarily driven by the strong performance of the Taobao and Tmall Group, which contributed 42.9% of total revenues, generating RMB 101.37 billion ($14.0 billion), a 9% increase year-over-year [3][5] - The China Commerce Retail segment, accounting for 94.3% of Taobao and Tmall revenues, reported revenues of RMB 95.6 billion ($13.2 billion), reflecting an 8% increase from the previous year [5] - The Alibaba International Digital Commerce Group, which includes Lazada and AliExpress, generated RMB 33.6 billion ($4.63 billion) in revenues, up 22% year-over-year [7] - The Local Services Group saw revenues of RMB 16.1 billion ($2.22 billion), a 10% increase from the year-ago quarter, driven by strong order growth in Ele.me and Amap [9] - The Cloud Intelligence Group reported revenues of RMB 30.1 billion ($4.15 billion), an 18% increase year-over-year, fueled by accelerated growth in public cloud revenues [11] Operating Performance - Operating income for the quarter was RMB 28.5 billion ($3.92 billion), up 92.8% year-over-year, with an operating margin expansion of 540 basis points to 12% [16] - Adjusted EBITDA increased by 36% year-over-year to RMB 32.6 billion ($4.5 billion), with an adjusted EBITDA margin expansion of 300 basis points to 14% [17] Membership and Customer Engagement - The number of 88VIP members, the highest-spending consumer group, increased to 50 million, reflecting double-digit growth year-over-year [4] Financial Position - As of March 31, 2025, cash and cash equivalents were $20 billion (RMB 145.49 billion), down from $22.3 billion (RMB 162.78 billion) at the end of the previous quarter [18] - Free cash flow for the quarter was $516 million (RMB 3.74 billion) [19]

Investment Rating - The report maintains a "BUY" rating for Alibaba with a target price of US$155.5, reflecting a potential upside of 25.5% from the current price of US$123.90 [1][2]. Core Insights - Alibaba's 4QFY25 results showed total revenue of RMB236.5 billion, a 6.6% year-over-year increase, and adjusted EBITA of RMB32.6 billion, up 36% year-over-year, indicating strong earnings growth across business segments [1]. - The report highlights the potential for accelerated cloud revenue growth, driven by investments in infrastructure and R&D, alongside solid performance in the Taobao and Tmall Group [1][5]. - Adjustments to revenue forecasts for FY26-27E reflect a 5% decrease due to the deconsolidation of Sun Art and increased investments in instant commerce, but the long-term outlook remains positive, particularly in the AI sector [18][19]. Financial Performance Summary - **Revenue and Profitability**: - FY25 total revenue reached RMB996.3 billion, with a projected FY26 revenue of RMB1,041.0 billion, reflecting a 4.5% year-over-year growth [6]. - Adjusted net profit for FY25 was RMB157.9 billion, with an expected increase to RMB166.8 billion in FY26 [6]. - **Segment Performance**: - Taobao and Tmall Group generated RMB101.4 billion in revenue for 4QFY25, up 9% year-over-year, with customer management revenue (CMR) at RMB71.1 billion, up 12% year-over-year [7][8]. - Cloud Intelligence Group (CIG) reported revenue of RMB30.1 billion, an 18% increase year-over-year, driven by strong demand for digitalization and AI-related products [12][13]. - AIDC revenue grew 22% year-over-year to RMB33.6 billion, with management targeting profitability in FY26 [10][11]. Valuation and Forecast - The new target price of US$155.5 translates to a 15.7x FY26E PE (non-GAAP), reflecting a SOTP-based valuation approach [22][25]. - The report indicates a decrease in the target price from the previous US$157.00, primarily due to adjustments in revenue forecasts and competitive pressures [2][22].

Industry Overview - The Internet-Commerce sector has experienced significant growth since the pandemic, particularly among Gen-Z consumers who are accustomed to high levels of digitization [1] - The evolution of Internet-Commerce is driven by advancements in user devices and AI-enabled software platforms that enhance transaction capabilities and user satisfaction [2] - E-commerce differentiation is achieved through improved technology for showcasing products, easier navigation, payment options, faster delivery, and enhanced brand loyalty [4] Investment Opportunities - It is advisable to invest in Internet-Commerce stocks with a favorable Zacks Rank, including Carvana Co. (CVNA), eBay Inc. (EBAY), Tripadvisor Inc. (TRIP), Chewy Inc. (CHWY), and Alibaba Group Holding Ltd. (BABA) [3][6] - The subscription model for repeat-use items is gaining traction, making it easier for consumers to order and for retailers to manage inventory, with discounts often offered to consumers [5] Company Highlights - **Carvana Co. (CVNA)**: Acquired ADESA's U.S. operations, enhancing logistics and auction capabilities. Expected revenue growth of 23.6% and earnings growth of over 100% for the current year [10][12][11] - **eBay Inc. (EBAY)**: Growth driven by Focus Categories and advertising offerings, with expected revenue growth of 1.7% and earnings growth of 8.4% for the current year [13][14] - **Tripadvisor Inc. (TRIP)**: Benefiting from strong performance in Viator and TheFork segments, with expected revenue growth of 4% and earnings growth of 7.7% for the current year [15][16] - **Chewy Inc. (CHWY)**: Focused on e-commerce for pet products, with expected revenue growth of 4.5% and earnings growth of 18.3% for the current year [17][18] - **Alibaba Group Holding Ltd. (BABA)**: Performance boosted by monetization of Taobao and Tmall, with expected revenue growth of 4.5% and earnings growth of 24.4% for the current year [19][21][20]

Investment Rating - The report maintains a "BUY" rating for Alibaba, with a target price of US$157.00, reflecting a potential upside of 49.8% from the current price of US$104.78 [2][9]. Core Insights - Alibaba is expected to achieve in-line revenue growth and adjusted EBITA for 4QFY25, driven by strong GMV growth and improved monetization rates in its core domestic e-commerce business [1][5]. - The cloud business is anticipated to see accelerated year-over-year revenue growth, supported by robust public cloud performance and contributions from AI cloud services [1][5]. - The company is positioned to benefit from the AI era and potential consumption stimulus policies, with non-core businesses projected to reach profitability within 1-2 years [1][5]. Financial Performance - For 4QFY25, Alibaba's revenue is estimated at RMB237.5 billion, representing a 7% year-over-year increase, while adjusted EBITA is forecasted to rise by 36% year-over-year to RMB32.6 billion, resulting in a 13.7% adjusted EBITA margin [5]. - The customer management revenue (CMR) is expected to grow by 10% year-over-year, driven by GMV growth and increased monetization rates [5]. - The Cloud Intelligence Group is projected to achieve 18% year-over-year revenue growth, while AIDC is expected to grow by 26% year-over-year [5]. Earnings Summary - Revenue forecasts for FY25E, FY26E, and FY27E are RMB996.979 billion, RMB1,090.438 billion, and RMB1,173.876 billion, respectively, with year-over-year growth rates of 5.9%, 9.4%, and 7.7% [6]. - Non-GAAP net profit for FY25E is estimated at RMB160.356 billion, with an adjusted EPS of RMB65.53 [6][8]. Valuation - The target price of US$157.00 is based on a sum-of-the-parts (SOTP) valuation, translating to 16.9x FY25E PE (non-GAAP) [9]. - The valuation includes contributions from various segments, with Taobao and Tmall Group valued at US$80.8 per ADS and the Cloud Intelligence Group at US$33.1 per ADS [9][10].

Core Insights - Alibaba Group's stock has surged by 52% in 2025, driven by strong performance in its cloud computing business and impressive earnings results [1][2] - The company plans to invest over $52 billion in cloud computing and AI infrastructure over the next three years, averaging around $18 billion annually [2][6] - Alibaba's cloud revenue reached $14 billion last year, with a significant growth trajectory in its cloud intelligence and international digital commerce segments [3][7] Financial Performance - In the latest earnings report, Alibaba's adjusted earnings per share were $2.95, exceeding forecasts by over 10% [3] - Cloud intelligence revenue grew by 13%, while international digital commerce saw a 32% increase [3] - Revenue from AI-related products has grown over 100% for six consecutive quarters, indicating strong demand and innovation in this area [4] Strategic Positioning - Alibaba holds a 36% market share in China's cloud infrastructure revenue, nearly double that of its closest competitor [9] - The company's planned investment in cloud and AI is substantial, especially considering its smaller cloud business compared to competitors like Microsoft [6][8] - The Chinese government is showing signs of easing tensions with tech companies, which could benefit Alibaba's growth prospects [11] Market Outlook - Analysts have a 12-month stock price forecast for Alibaba at $144.07, indicating a potential upside of 3.51% [7] - The average implied upside from seven price targets tracked post-earnings is 24% as of February 25 [12] - Despite challenges in the Chinese stock market, there is potential for significant appreciation in Alibaba's stock due to its strategic investments and market position [10]