Nasdaq BABA Alibaba

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As a result of the exceedingly quick economic recoveries in both the U.S. and China, many ecommerce companies reaped massive benefits. Many consumers were stuck at home, and with economic trends rebounding, were more than comfortable spending their cash online.

 As the world’s largest online retailer, the Alibaba Group (BABA) saw a huge increase in consumers as well as merchants willing to sell to them. However, now that the trends are slowing, BABA must use its newfound status to push toward the future. (See Alibaba stock charts on TipRanks)  

Bo Pei of Oppenheimer & Co. Reported on this issue, stating that “BABA is leveraging its advantages in supply chain and capital to penetrate lower-tier markets.” It recently received rather unfavorable anti-monopoly remarks from the government of China, but Pei sees that investors need not fear.  

Pei maintained a Buy rating on the stock and assigned a new price target of $310. This target was downgraded slightly from his previous $320 to reflect the industry-wide slowdowns in ecommerce. It now represents a potential 12-month upside of $50.87.  

The analyst explained that BABA’s customers were sticky and loyal to the brand, and their spending is “growing at a healthy pace.” Although gross merchandise value (GMV) growth had fallen from April to May, it recovered in June, which enthused Pei. The GMV had grown so much throughout the previous year, that it was expected to pull back eventually.  

Alibaba hosted a multi-week shopping festival from May through June, when it had over 100% more merchants join in than the previous year, and millions of products were launched. Pei was please to write that this was the first festival to occur after China’s anti-monopoly investigations, and it went off better than in any previous year.  

Pei noted the share price is currently trading at its lowest since the company’s IPO, in regard to shares trading at 20 times the estimated earnings of the next twelve months.  

On TipRanks, BABA has an analyst rating consensus of Strong Buy, based on 21 Buy and 2 Hold ratings. The average Alibaba price target is $291.29, suggesting a potential 12-month upside of 41.76%. The online retail giant closed trading Monday at a price of $205.48 per share.  

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. 

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Wall Street lost ground on Thursday, with the S&P 500 and the Nasdaq pulling back from record closing highs in a broad sell-off driven by uncertainties surrounding the pace of the U.S. economic recovery.

Some of the mega-caps have underperformed the market this year, but none have had it as hard as Alibaba (BABA). Shares sit 14% into negative territory in 2021, as the company has engaged in various scuffles with Chinese regulators from which the stock has yet to fully recover.

With the June quarter now behind us, Nomura’s Jialong Shi thinks the company is also suffering due to last year’s post-pandemic economic recovery in China and believes the quarter amounted to a “light period” due to several factors.

“First, the year’s June quarter had a high base to compare as the ecommerce growth last year was fueled by post-pandemic pent-up demand as well as consumer coupons granted by many local municipalities to boost consumption,” the 5-star analyst said. “Secondly, in light of increased regulatory scrutinies, industry leaders like BABA could be increasingly cautious this year in marketing and promotion spends, and this could dent its growth.”

China’s e-commerce market growth is also showing signs of deceleration. The growth rate hit 16% in April yet only reached 10% in May.

As such, while Shi expects Alibaba’s total revenue in 1QFY22 to grow by 33% year-over-year to CNY204 billion, the figure is 5% beneath the latest consensus estimate of CNY215 billion. The analyst also thinks consolidated EBITA could decline by 10% from the same period last year to CNY41 billion, just under the Street’s forecast of CNY42 billion.

The below-consensus revenue projection is due to last year’s acquisition of one of China’s largest supermarket chains Sun Art. China has experienced a massive uptick in online grocery shopping which Shi says is impacting the retail supermarket business.

Consequently, the “sluggish” offline supermarket sales could see revenue for the company’s new retail segment fall by 13% quarter-over-quarter to CNY52 billion, which is also below the Street’s forecast of CNY62 billion.

All in all, however, there’s no change to Shi’s rating which stays a Buy, or price target, which remains at $285. Upside potential from current levels is 42%. (To watch Shi’s track record, click here)

Looking at the consensus breakdown, barring one Hold, all other 26 recent reviews are to Buy, naturally culminating in a Strong Buy consensus rating. The average price target is a bullish one; at $298.33, the figure suggests 12-month gains of ~49%. (See Alibaba stock analysis on TipRanks)

To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.

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.

Wall Street closed lower on Thursday, retreating from record closing highs in a broad sell-off driven by uncertainties surrounding the pace of the U.S. economic recovery.

Technology stocks remained under pressure near the close, with the SPDR Technology Select Sector ETF down 1.0% and the Philadelphia Semiconductor Index declining 1.5%.