Alibaba's surprising split likened to Google, Alphabet transformation: analyst
Mar. 29, 2023 8:20 AM ET
Alibaba Group Holding Limited (BABA), GOOG, GOOGL
By: Chris Ciaccia, SA News Editor
 Robert Way
Alibaba's (NYSE: BABA) surprising decision to split itself into six main parts, with all six likely to raise funds or go public, is being likened to Google's decision to transform itself into Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL), investment firm J.P. Morgan said.
Analyst Alex Yao, who has an overweight rating and $140 per-share price target on Alibaba ( BABA), said the move provide a "clear sentiment booster" for the stock price in the near-term.
"Compared to Google’s reorganization, we think share price impact from Alibaba reorganization could potentially bring about even more near-term upside, given Alibaba’s intention to separately list all eligible assets," Yao wrote in an investor note. He pointed out that Google ( GOOG) ( GOOGL) rose 14% in the three months after the August 10, 2015 announcement and 21% in the three months after the actual structure happened on October 2, 2015.
Yao also noted the could be significant for overall fundamentals in the mid-to-long-term, potentially making the company "more nimble and agile," citing previous decision making processes as "much slower" than its peers.
"We expect the reorganization to speed up Alibaba’s decision-making process and drive operational efficiency of each business group," Yao posited.
The analyst also noted that the entire group of six is likely to be even more cost-efficient than in the past, given they will now be accountable for their own performance.
Following the news, Wall Street firms praised the plan, including Barclays, which said the decision is "a significant step towards shareholder value creation." |
