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)
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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.
Online retail exploded over the last year and a half. As consumers were stuck at home riding out the COVID-19 pandemic, they took to their devices and started purchasing. Although online retail may be taking a bit of a breather from last year’s frenzy, the industry is still ripe for the investing, and the Alibaba Group (BABA) is there to get the job done. (See Alibaba stock chart on TipRanks)
Vincent Yu of Needham & Company reported on the stock, stating that although a slowdown in retail sales is expected, he is maintaining his estimations for profits from Alibaba. These projections come before the company reports its earnings, later in the summer.
Yu reiterating his Buy rating on the stock, and declared a price target of $330. This target would reflect a potential 12-month upside of 58.65%.
The four-star analyst did, however, lower his revenue expectations, but that did not stop him from adding that the current valuation of the stock is compelling for entry.
Regarding regulatory challenges, Yu wrote that he believes “the worst period is over for Alibaba and further downside is limited.” He was enthusiastic about the company’s approach to the growing online grocery business, stating that it is attacking the market “with an omnichannel strategy.”
Furthermore, Yu went on to describe the current shift in management in Alibaba, stating that the company had replaced the head of its local services team. The analyst expects to see impressive business practices in the online delivery subsidiary Eleme. Inc, web mapping program Autonavi, and the online travel platform Fliggy.
On TipRanks, BABA has an analyst rating consensus of Strong Buy, based on 24 Buy ratings and 1 Hold rating. The average Alibaba price target is $298.33, suggesting a potential 12-month upside of 43.43%. BABA closed Wednesday at a price of $208 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.
U.S. futures were trending lower on Thursday as investors continue to pay close attention to dramatic moves in the Treasury market. The sell-off in the equity market comes amid growing worries over a potential slowdown in growth resulting from COVID-19 shocks.
Dow futures slid 1.06%, S&P futures fell 1.0%, and Nasdaq futures were down 1.03% at the time of writing.
Northern Technologies International (NTIC) and Saratoga Investment Corp. (SAR) are expected to report their quarterly earnings before the market opens. Duck Creek Technologies Inc. (DCT), Kewaunee Scientific Corp. (KEQU), Concord Medical Services Holdings, Ltd. (CCM), and Accolade Inc. (ACCD) are expected to report after the market closes.
Daré Bioscience Inc. (DARE) was the most actively traded stock in pre-market trading, jumping 14.14%, with more than 1.6 million shares changing hands at the time of writing. The pop came a day after the California-based health care company said it secured a $48.95 million grant from the Bill & Melinda Gates Foundation.
Aerpio Pharmaceuticals Inc. (ARPO) was the biggest gainer in the pre-market, popping 70.76% at the time of writing.
Exela Technologies Inc. (XELA) was the biggest loser in the pre-market, falling about 19% at the time of writing. The slide comes a day after the company announces it has raised $85 million in proceeds from its recently announced $150 million at-the-market equity program.
In M&A news Iron Mountain Incorporated (IRM) has reached an agreement to acquire a data center in Frankfurt from Calcium DC Pte Ltd for €76 million. The transaction is expected to close in the next 90 days, subject to customary closing conditions.
DiDi's (DIDI) prospects in China have received yet another blow on Alibaba’s (BABA) Alipay suspending support for its light version software. The mobile and online payment platform has confirmed it will no longer offer light-version software to new users. The suspension follows an order by Chinese regulators against the app's listing on app stores in China.
Telefonica (TEF) is teaming up with viral video platform Tik Tok to come up with new ways for people to enjoy videos across its services. The two companies will partner in areas of service distribution marketing and enhancing technological efficiencies. Additionally, the telecommunication company intends to develop local co-marketing and strategic partnerships for European and Latin American markets.