Why These 2 Alibaba Analysts Expect Muted Near-Term, Positive Long-Term Prospects

After see-sawing through much of Thursday's session, Alibaba Group Holding Limited BABA ended modestly higher. Two more sell-side firms tempered their expectations on the Chinese company even while retaining a bullish bias on the stock.

The Alibaba Analysts: KeyBanc Capital Markets analyst Hans Chung maintained an Overweight rating on Alibaba shares and lowered the price target from $250 to $200.

Raymond James analyst Aaron Kessler downgraded the shares from Strong Buy to Outperform and reduced the price target from $300 to $240.

Weaker Macro to Weigh On Alibaba's Near-Term, KeyBanc Says: Alibaba is likely to report lower customer management revenue on slower gross merchandise volume growth for the second quarter of fiscal year 2022 due primarily to a weaker-than-expected macroeconomic environment, KeyBanc analyst Chung said.

Margins are also expected to contract on lower CMR and continued high investment in community marketplace and the low-tier segment, the analyst said.

"We believe the impact of PIPL and algorithm rules look better than feared given Taobao as more bottom-of-the-funnel marketing-centric and early observations on user behaviors for opt-out," he said. 

KeyBanc continues to view Alibaba as attractive long-term, given its moat in e-commerce and Alicloud's potential, Chung said. 

The price target reduction, the analyst said, was due to lowered revenue and operating profit estimates for the second quarter of fiscal year 2022 and beyond, mainly due to lower GMV growth, the analyst said. 

Related Link: Why Alibaba Shares Are Rebounding From Wednesday's Losses

Slowing E-Commerce Growth, Regulatory Actions Are Pushbacks, RayJay Says: Recovery in Alibaba shares could take longer given the recent slowing in e-commerce growth and continued regulatory actions across China, RayJay's Kessler said.

Factors currently pressuring e-commerce growth include continued intermittent lockdowns due to COVID-19, a slowing real estate growth outlook, and supply chain issues, including recent power outages, the analyst said.

Although some of these factors are transitory, these are weighing on consumer retail growth near-term and there is increased uncertainty in terms of a growth recovery, he said.

The analyst tempered his Chinese retail growth estimates for the near-term as well as for fiscal years 2022 and 2023.

RayJay said it remains positive on Alibaba long-term and believe valuation remains attractive.

BABA Price Action: Alibaba shares were trading down 2.38% Friday morning at $144.52. 

Related Link: Alibaba Opens Up Walled Garden To Allow Rival Tencent's Payment System In Some Apps

Posted In: Aaron KesslerChinaHans ChungKeyBanc Capital MarketsRaymond JamesAnalyst ColorDowngradesPrice TargetReiterationAnalyst Ratings

Ad Disclosure: The rate information is obtained by Bankrate from the listed institutions. Bankrate cannot guaranty the accuracy or availability of any rates shown above. Institutions may have different rates on their own websites than those posted on Bankrate.com. The listings that appear on this page are from companies from which this website receives compensation, which may impact how, where, and in what order products appear. This table does not include all companies or all available products.

All rates are subject to change without notice and may vary depending on location. These quotes are from banks, thrifts, and credit unions, some of whom have paid for a link to their own Web site where you can find additional information. Those with a paid link are our Advertisers. Those without a paid link are listings we obtain to improve the consumer shopping experience and are not Advertisers. To receive the Bankrate.com rate from an Advertiser, please identify yourself as a Bankrate customer. Bank and thrift deposits are insured by the Federal Deposit Insurance Corp. Credit union deposits are insured by the National Credit Union Administration.

Consumer Satisfaction: Bankrate attempts to verify the accuracy and availability of its Advertisers' terms through its quality assurance process and requires Advertisers to agree to our Terms and Conditions and to adhere to our Quality Control Program. If you believe that you have received an inaccurate quote or are otherwise not satisfied with the services provided to you by the institution you choose, please click here.

Rate collection and criteria: Click here for more information on rate collection and criteria.