Big player Alibaba has proven itself in the stock market, but is it worth your investment this time around?
There are mega-caps that have performed badly in the market this year, and Alibaba (BABA) has had the end of the stick. Its shares have been sitting at fourteen percent in the negative territory in 2021. Moreover, the company has been entwined into various scuffles with the regulators from China, so its stock has yet to get back on track.
Alibaba company performance
After the end of the June quarter, Jialong Shi from Nomura thinks that Alibaba has also been suffering from the post-pandemic economic recovery in China last 2020. The analyst also believes that the quarter has ended to a “light period” due to a variety of factors.
According to Shi, the first factor is the growth of e-commerce last year which was fueled by the post-pandemic demand by consumers, along with some coupons for consumers that were given by a number of municipalities locally in order to boost their consumption. As such, it led to the high base of the June quarter this year. The second factor might be the increased cautiousness of industry leaders such as BABA, that is why there are a lot of increased regulatory scrutinies. This, in return, could dampen the growth.
Market growth of e-commerce
The market growth of e-commerce in China has also been exhibiting signs of slowing down. The growth rate has hit sixteen percent in April, but only reached ten percent in May.
Given that, although Shi projects that Alibaba’s entire revenue in the first quarter for the year 2022 to grow by about thirty-three percent year over year to CNY205 billion, the number is still five percent below the latest consensus estimate of CNY215 billion. The analyst also believes that the combined EBITA may decline by ten percent from the same period from 202 to CNY41 billion, just below the forecast of CNY42billion.
The projection of below-consensus revenue is because of the acquisition from last year by one of China’s biggest supermarket chains Sun Art. The country has also gone through a large uptick in its online grocery shopping, which Shi states to be impactful to the business of retail supermarkets.
As a result, the sluggish offline supermarket shares may ee the revenue for Alibaba’s new retail segment flop by thirteen percent quarter-over-quarter to CNY52 billion, which is also under the forecast of CNY62 billion.
To sum it all up, however, there is no change in terms of the rating given by Shi which stays a Buy for Alibaba’s stocks, or price target, which stays at $285. In a review of the consensus breakdown, which barred one Hold, all other recent reviews are to Buy, which naturally culminates in a Strong Buy consensus rating. The average price target is bullish, which, at $298.33, may provide a gain of ~49% after 12 months.
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Alibaba’s stock is a Buy right now, at least according to some analysts. It is essential that you weigh the pros and cons carefully before thinking of buying stocks, given that the politics at play, especially against a giant nation like China, can make or break a business.