Why This Alibaba Analyst Is Cutting Price Target After Q2 Results

US Tiger Securities analyst Bo Pei reduced his price target on Alibaba Group Holding Ltd BABA to $110 from $120, while maintaining a ‘Buy’ rating on the stock, after the company implied gross merchandise value (GMV) could continue to decline in the December quarter due to the recent COVID-19 outbreak.

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Alibaba reported September-quarter revenue growth of 3% to $29.12 billion, missing the consensus of $29.45 billion. Its board has approved upsizing the share repurchase program by another $15 billion and extending the program to the end of FY 2025.

The online physical goods GMV for Taobao and Tmall, excluding unpaid orders, recorded a low-single-digit year-over-year decline due to COVID-19 resurgence, restrictions, and competition.

Alibaba shares have gained over 12% in the last five days.

“Overall, while we are lowering our December quarter estimates primarily due to the recent COVID outbreak in China, we see signs of easing COVID restrictions positive for the sector and BABA, and believe a more robust recovery is possible in the March quarter,” Pei said in a note.

Estimate Revision: The analyst reduced his December-quarter revenue estimate for Alibaba by 3% and trimmed his EBITDA forecast by 9%, based on a 139 bps lower margin. “Also decreasing FY23 revenue estimate by 1%, with EBITDA estimate largely unchanged,” Pei said in the note.

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