Cainiao IPO withdrawal positive longer term for Alibaba, says JPMorgan

JPMorgan keeps an Overweight rating on Alibaba with a $105 price target after the company announced the withdrawal of its logistics subsidiary Cainiao’s initial public offering application. Given the challenging capital market environment, pushing the IPO at this time might not be able to achieve the initial purpose of unlocking shareholder value, the analyst tells investors in a research note. In addition, the firm says cross-border e-commerce now is gaining strong traction, and Alibaba intends to further integrate Cainiao’s logistics business with its AIDC group to provide a better user experience for global consumers. With Cainiao likely to step up its infrastructure investment, JPMorgan believes Alibaba shares may see near-term pressure considering most investors value the company on an earnings basis. However, given the fast growth of the cross-border ecommerce business, such investment should pay off in the long run, says the firm. It believes the IPO withdrawal is natural to negative in the short-term but a long-term positive.