Alibaba: still a “convincing” long-term purchase, analyst says

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Alibaba (BABA) Investors had to bite the bullet throughout 2021 as shares of the Chinese e-commerce giant have come under constant pressure due to macroeconomic, regulatory and structural challenges. Even so, while the issues were well known before the company’s F2Q22 results (September quarter), the numbers still haven’t impressed.

All major measures are below expectations; Revenue reached CNY 200.69 billion, below the consensus estimate of CNY 204.1 billion, while Adj. EBITA posted CNY 28.03 billion, missing the street appeal of CNY 30.99 billion. Adj. EPS (by ADS) came in at 11.20 CNY, also below analysts’ forecast of 11.86 CNY.

Core Commerce (CC), which accounts for around 85% of the company’s total revenue, climbed 31% to CNY 171.2 billion. However, the figure was both lower than consensus expectations of CNY 174.95 billion and a 35% growth deceleration shown at F1T22, as the company faced tough competition and a significant slowdown. the Chinese economy, which flourished in the aftermath of the pandemic.

But it’s not just the macro elements that affect performance. The company has also been in heavy investment mode. As such, Core Commerce segment EBITA reached CNY 32.27 billion, which is a 19% margin compared to a 25% margin in F1T22 and 35% in F2Q21.

by Truist Youssef Squali note the reason for the drop.

“We view the segment’s year-over-year decline in margin as the result of management’s continued commitment to merchant support programs, in addition to investing additional profits in areas of business growth,” and in accordance with its message, although the level of investment is above our expectations / Street, ”said the 5-star analyst.

Going forward, for fiscal 22, Alibaba reduced its revenue forecast to year-over-year growth of 20-22% (860-875 billion RMB), down from earlier expectations of “at least” 930 billion, reflecting a ~ 60-75 billion decrease.

However, despite the pessimistic sentiment, the analyst calls the long-term thesis “compelling” and points to the potential for a positive impact from the next analysts day (December 16-17), where BABA “will flesh out its growth strategy. and define investment and profitability expectations.

Overall, Squali is sticking to a buy note although the price target is reduced from $ 230 to $ 200. Nevertheless, there is still an increase of 49% from current levels. (To see Squali’s palmares, Click here)

Despite the difficult quarter, only one analyst is currently staying away from BABA, with the other 20 recent reviews being positive, resulting in a strong buy consensus rating. Based on the average price target of $ 216.10, stocks will appreciate about 62% over the next 12 months. (See the analysis of Alibaba shares on TipRanks)

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Disclaimer: The opinions expressed in this article are solely those of the analyst presented. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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