Lee shared key points from his BABA checks.
GMV tracks modestly below consensus at -3% Y/Y.
Although July improved from June, August lagged, while September benefited from the iPhone-14 launch.
Regional lockdowns did not meaningfully impact logistics, but consumer sentiment remains tenuous.
He expects September quarter CMR revenue Y/Y growth to improve 5 points to -5%, behind consensus of -1% YoY as cancellation rates normalized but below Street expectations.
Although he expects softer cloud revenue growth versus Street, he anticipates overall profitability (China commerce and consolidated EBITA margins) ahead of consensus due to increased efficiency and cost cuts on new investments.
He believes BABA is a defensive play for China's uncertain macro outlook.
He believes that the stock has only been priced in core commerce and cloud and that new investments like Food Delivery, Online Video, and Payments are free call options.
He listed four catalysts for multiple margin expansion to historical low- to mid-teens levels. They included margin improvements from a simplified business model, formal resolution to the audit agreement to reduce investor overhangs, modification to China macro and pathway to reopening post-20th Party Congress, and the completion of Ant Group restructuring.
Price Action: BABA shares traded higher by 0.39% at $84.71 on the last check Thursday.
Latest Ratings for BABA
See more from Benzinga
Don't miss real-time alerts on your stocks - join Benzinga Pro for free! Try the tool that will help you invest smarter, faster, and better.
© 2022 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.