Moderate Recovery, Consumer Softness, Macro Headwinds Weigh On Alibaba, Analyst Says

Benchmark analyst Fawne Jiang reiterated a Buy on Alibaba Group Holding Limited BABA and a $206 price target.
China retail and e-commerce was on a gradual recovery in the September quarter off a highly disruptive June quarter. However, the recovery pace was moderate.
Consumer sentiment remains soft attributable to the lack of confidence aggravated by COVID uncertainties and the reduction of use cases for consumer discretionary categories.
With BABA's significant exposure to discretionary categories, he anticipates BABA GMV trailing the industry growth in the quarter and has consequently lowered his 2Q23 revenue growth to 3.8% Y/Y vs. 6% Y/Y prior.
On the positive side, his checks suggested BABA continues to execute its quality growth strategy with sustained effort on cost and investment optimization.
As such, he expects potential upside to his prior bottom-line estimates and has raised his 2Q23 EBITDA estimate to RMB36 billion (+1 billion).
Amidst macro uncertainties as a backdrop, he acknowledges growth uncertainties in the close quarters.
He saw gains in downside protection despite short-term growth fluctuation with adequate cost savings.
Price Action: BABA shares traded higher by 2.42% at $80.97 on the last check Friday.

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