＜Research＞UBS: Alibaba (BABA.US) New Ad Tool Progress Takes Time; It Will Take Few Qtrs Before +ve Earnings Revision

　　UBS noted in a report that merchants are observing a continued shift in traffic from Tmall (branded products) to Taobao following BABA-SW (09988.HK) -1.950 (-2.573%) Short selling $371.04M; Ratio 23.338% increased emphasis on low prices, which is positive for conversion but will be adverse to the brands' results and BABA's take rate in the short term.

　　According to the broker's calculations, Tmall contributed about 50% of BABA's gross merchandise volume (GMV), but provided 70-80% of advertising revenue. BABA upgraded its advertising system with the launch of two new artificial intelligence (AI)-powered products - Wanxiangtai Unbounded and Sitewide Advertising. Branded merchants' ROI has improved since 1Q24 on Wanxiangtai Unbounded as more data is used to enhance algorithms.

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　　The broker believed that BABA's strategic shift has begun to pay off, leading to an increase in GMV (up around 10% year-to-date). However, during this transition period, BABA still needs to strike a balance between GMV, increasing take rates from branded merchants and customer management revenue (CMR) growth. The broker believed BABA's new advertising tools would take time to further develop and expected a positive earnings revaluation to take a few quarters.

　　UBS has a US$105 target price and a Buy rating on BABA's US shares (BABA.US) .

　　(HK stocks quote is delayed for at least 15 mins.Short Selling Data as at 2024-07-19 12:25.) (Real-time Streaming US Stocks Quote; Except All OTC quotes are at least 15 minutes delayed.)

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