A sign promoting Alibaba’s Singles Day online shopping event.
Qilai Shen/Bloomberg
Alibaba
‘s stock price target was lowered by Raymond James analysts due to near-term headwinds. But for the long-term, the analysts expect the Chinese e-commerce giant to be a winner.
Raymond James analyst Aaron Kessler cut his price target on U.S.-listed shares of the Chinese technology giant to $200, down from $220 in response to near-term headwinds, such as lagging growth in the Chinese real estate and e-commerce sectors, additional strains from the Covid-19 pandemic, and supply-chain issues.
Chinese e-commerce growth slowed to around 5.3% year over year in the December quarter, compared with 8.7% in the previous quarter, Kessler said. The analyst now estimates zero growth for the company’s China Retail Marketplaces, down from a previous 3% estimate. The stunted growth could be due to myriad factors, including continued Covid lockdowns that impact business activity, he said.
Kessler lowered his revenue estimates for Alibaba’s (ticker: BABA) fiscal third quarter by 5.4%, and yearly revenue by 2.5%. He also trimmed third-quarter estimates for Alicloud and Alibaba’s offline commerce business. Based on this new analysis, Kessler believes the stock will continue to see an upside, albeit at a slower pace than he previously predicted.
Earlier in January, Citigroup analysts slashed their target price for Alibaba, citing concerns about regulatory pressures and slowing growth.
Chinese regulators have been ramping up scrutiny of major tech companies, issuing a flurry of fines that have spooked investors. Alibaba may soon face additional oversight stateside, after a report from Reuters said the White House was investigating Alibaba’s cloud business as a potential risk to U.S. national security. The report cited anonymous sources and has not yet been confirmed.
Despite the price cut, Kessler reiterated an Outperform rating on Alibaba shares as its valuation remains attractive, he said. In the long run, the stock could continue to rise as Alibaba grows its international segment and cloud services, he added.
“We expect continued solid long-term China e-commerce growth with Alibaba the biggest winner,” he wrote in a research note on Wednesday.
U.S.-listed shares of Alibaba were wavering on Wednesday, dropping 0.3% to $128.23. The stock took a tumble Tuesday, when it slipped around 2%. Tech stocks have been under pressure pending interest rate hikes from the Federal Reserve and a spike in bond yields.
Write to Sabrina Escobar at [email protected]
