Why These 2 Alibaba Analysts Expect Muted Near-Term, Positive Long-Term Prospects

After see-sawing through much of Thursday's session, Alibaba Group Holding Limited BABA ended modestly higher. Two more sell-side firms tempered their expectations on the Chinese company even while retaining a bullish bias on the stock.

The Alibaba Analysts: KeyBanc Capital Markets analyst Hans Chung maintained an Overweight rating on Alibaba shares and lowered the price target from $250 to $200.

Raymond James analyst Aaron Kessler downgraded the shares from Strong Buy to Outperform and reduced the price target from $300 to $240.

Weaker Macro to Weigh On Alibaba's Near-Term, KeyBanc Says: Alibaba is likely to report lower customer management revenue on slower gross merchandise volume growth for the second quarter of fiscal year 2022 due primarily to a weaker-than-expected macroeconomic environment, KeyBanc analyst Chung said.

Margins are also expected to contract on lower CMR and continued high investment in community marketplace and the low-tier segment, the analyst said.

"We believe the impact of PIPL and algorithm rules look better than feared given Taobao as more bottom-of-the-funnel marketing-centric and early observations on user behaviors for opt-out," he said. 

KeyBanc continues to view Alibaba as attractive long-term, given its moat in e-commerce and Alicloud's potential, Chung said. 

The price target reduction, the analyst said, was due to lowered revenue and operating profit estimates for the second quarter of fiscal year 2022 and beyond, mainly due to lower GMV growth, the analyst said. 

Related Link: Why Alibaba Shares Are Rebounding From Wednesday's Losses

Slowing E-Commerce Growth, Regulatory Actions Are Pushbacks, RayJay Says: Recovery in Alibaba shares could take longer given the recent slowing in e-commerce growth and continued regulatory actions across China, RayJay's Kessler said.

Factors currently pressuring e-commerce growth include continued intermittent lockdowns due to COVID-19, a slowing real estate growth outlook, and supply chain issues, including recent power outages, the analyst said.

Although some of these factors are transitory, these are weighing on consumer retail growth near-term and there is increased uncertainty in terms of a growth recovery, he said.

The analyst tempered his Chinese retail growth estimates for the near-term as well as for fiscal years 2022 and 2023.

RayJay said it remains positive on Alibaba long-term and believe valuation remains attractive.

BABA Price Action: Alibaba shares were trading down 2.38% Friday morning at $144.52. 

Related Link: Alibaba Opens Up Walled Garden To Allow Rival Tencent's Payment System In Some Apps