Alibaba Stock: Could Patience Pay?
Alibaba (BABA) disappointed with its quarterly performance. However, that shouldn’t surprise much as expectations were already low ahead of the earnings. What surprised the most is the market’s reaction to its quarterly miss.
It’s worth noting that the shares of this Chinese tech giant stock closed 11.1% lower on Thursday, signifying that investors are losing patience on BABA stock.
TipRanks’ Stock Investors tool indicates that investors who hold portfolios on TipRanks are offloading Alibaba stock. Notably, about 4% of these investors have decreased their exposure to BABA stock in the last 30 days.
Further, TipRanks’ Hedge Fund Trading Activity tool indicates that hedge fund managers have decreased their holdings in Alibaba stock by 1.1 million shares in the last quarter.
Alibaba stock has underperformed the Nasdaq composite index this year. Further, including yesterday’s decline, Alibaba stock is now down 38.8% on a year-to-date basis.
Analyst Weighs In
While China’s crackdown on its tech companies and challenging macro and competitive environment weighed on Alibaba stock, Scott Devitt of Stifel Nicolaus maintained a Buy rating on BABA stock despite weak Q3 performance.
Devitt’s bullish outlook is centered around Alibaba’s leading market share in China’s online commerce, asset-light model, investments in growth (including cloud services, content, and multi-channel retail), and international expansion.
However, Devitt lowered his price target on Alibaba stock to $170 from $210 to account for the reduction in FY22 revenue guidance.
Citing “weakness in domestic consumption, Alibaba now expects a 20%-23% year-over-year increase in its revenues, lower than its previous growth guidance of 30%.
Wall Street’s Take
Alongside Devitt, the majority of analysts continue to show confidence in Alibaba stock. On TipRanks, Alibaba has received 20 Buys, one Hold, and one Sell for a Strong Buy consensus rating.
However, Alibaba scores 4 out of 10 from TipRanks’ Smart Score rating system, indicating that BABA stock could move in tandem with the broader market.
The average Alibaba price target of $226.85 implies 58% upside potential to current levels.
Disclosure: On the date of publication, Amit Singh had no position in any of the companies discussed in this article.
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