Russia’s invasion of the Ukraine is already having ramifications for the current world order and will resonate far beyond the region. Apart from the geopolitical implications - finance, trade and commerce will all feel the impact.
Will Alibaba (BABA) feel it too? After all, Russia is Alibaba's AliExpress segment’s largest market.
Maybe so, but given business conducted on AliExpress Russia does not get consolidated in Alibaba’s results, Baird's Colin Sebastian thinks exposure to Russia/Ukraine is “quite modest.” “We assume there is risk to valuation of this joint venture,” the 5-star analyst went on to say, “Although still a relatively minor investment for the company.”
In any case, Sebastian thinks the Chinese ecommerce giant has other issues to contend with. The recent F3Q results “reflected the slowing macro/retail backdrop and intense competition impacting core retail growth.” Along with pandemic headwinds, these have resulted in slower retail and e-commerce sales in China.
Considering the impact of subsidies and fee waivers given to merchants, despite positive GMV growth, CMR (customer management revenue) fell by ~1% from the same period last year, while slower growth in apparel and general merchandise categories also played a part in the downbeat performance. Furthermore, the company is seeing competition intensify in both established markets and more rural areas.
To counter these developments, monetization has been put “on the back burner,” with the company focused on “growing the customer base as well as increasing engagement.”
At the same time, international segment order growth has stayed robust (up 18%), the company is making inroads with local services (22% order growth) and, importantly, says Sebastian, Alibaba is “showing more progress with community buying and Taobao Deals, which help to counter competing platforms.”
And there’s enough evidence to show the company can meet the current challenges. “The biggest takeaway is that Alibaba remains focused on long-term growth despite the near-term macro and competitive headwinds,” summed up Sebastian, “And we continue to see significant value in the company's technology-oriented e-commerce and cloud services platform.”
Therefore, the analyst maintains an Outperform (i.e., Buy) rating, although the price target is reduced from $180 to $160, implying shares have room for ~52% growth over the coming year. (To watch Sebastian’s track record, click here)
Overall, 23 analysts have posted BABA reviews over the past 3 months, of which 21 say Buy while 2 recommend to Hold, all coalescing to a Strong Buy consensus rating. The average price target stands at $178.53, and should it be met, investors are looking at 12-month returns of 69%. (See Alibaba stock forecast on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.