Alibaba slips, JP Morgan says Q4 results a 'philosophical' strategy change
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Alibaba (NYSE:BABA) shares fell nearly 2% on Friday even as investment firm J.P. Morgan said the company's fourth-quarter results indicate a "philosophical change" in the company's corporate, e-commerce and investor communications strategies.
A team of analysts, led by Alex Yao, said on the corporate side, the results show a "serious intention" to unlock shareholder value in an intelligent and cost-effective way, as it begins the process of splitting into six different parts.
On Thursday, Alibaba (BABA) Chairman and CEO Daniel Zhang said the company's board had approved a full spin-off of the Cloud Intelligence Group to shareholders, with it eventually becoming an independent public company.
For e-commerce, the analysts said the company's management "has sharpened its focus" to only worry about gaining market share for Taobao.
"In our view, the new e-commerce strategy could lead to downside risk to near-term earnings estimates," the analysts wrote. "However, we believe the new corporate strategy will more than offset the negative impact on the stock price from potential earnings cuts."
The analysts added that while the near-term stock price is likely to be linked to geopolitical risk, the recovery of China's economy and the company's earnings risk, the current stock price is not reflective of the corporate breakup, even if the heavy investment in Taobao does not show a return.
Earlier this month, Trudy Dai, the CEO of Taobao Tmall Commerce Group, said at a conference it would make "huge, historic" investments in Taobao.
Other Chinese stocks were mostly lower on Friday, including Baidu (BIDU), PDD Holdings (PDD) and JD.com (JD).
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