UBS analyst Jerry Liu lowered the price target on Alibaba (NYSE: BABA ) to $140.00 per share from $150.00 on near-term headwinds.
The lowered price target reflects lower estimates for F4Q22 (Mar Q) and FY23 to mirror “incremental Covid-19 related headwinds, on top of regulatory and macro impacts last year.”
Liu expects to see March online retail sales growth decelerating “significantly” amid a spike in Covid-19 cases across China. Hence, the near-term challenges are likely to force Alibaba to cut costs.
“This will impact supply chains and fulfillment networks, and weaken consumer demand, especially in categories like apparel. We now assume the Jun Q is the trough for Customer Management revenue (CMR) YoY growth vs. Mar Q previously, as we conservatively assume the MoM deterioration in growth near term offsets the easing YoY comparisons. There are some additional growth impacts to domestic on-demand, international e-commerce, and cloud segments, but we also see improvements later this year,” Liu said in a client note.
Still, the analyst remains positive on BABA shares.
“As consumption in China recovers later this year, we expect Alibaba's top and bottom line growth rates to accelerate. With the stock trading at 10x/9x CY22/23 earnings, we believe the risk/reward is attractive given an average of 13% EBIT growth in CY23-25, limited regulatory risks from here, and improving sector-wide cost control. Any positive outcome on ADR listing negotiations between regulators, and to a lesser extent shifting Alibaba's Hong Kong listing to a primary one could be additional catalysts,” Liu said in a client note.
Alibaba stock price is down 1.5% today.
By Senad Karaahmetovic
Add Chart to Comment
We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:
- Enrich the conversation
- Stay focused and on track. Only post material that’s relevant to the topic being discussed.
- Be respectful. Even negative opinions can be framed positively and diplomatically.
- Use standard writing style. Include punctuation and upper and lower cases.
- NOTE: Spam and/or promotional messages and links within a comment will be removed
- Avoid profanity, slander or personal attacks directed at an author or another user.
- Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
- Only English comments will be allowed.
Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.