Alibaba Upgraded To 'Buy' By Analyst, Long-Awaited 'Inflection Point' Coming

Chinese e-commerce giant Alibaba Group Holding Ltd's BABA stock is expected to hit a "long-awaited inflection point" in the current quarter despite the challenging three months ended March when it reported the slowest revenue growth since going public in 2014, according to analysts at US Tiger Securities.

The Alibaba Analyst: US Tiger Securities analyst Bo Pei has upgraded the stock to ‘buy’ from ‘hold’ but maintained the price target to $130.

The Alibaba Thesis: The analyst said he believes Alibaba's revenue and profitability will bottom out in the current quarter and that revenue and growth margin are expected to rise in the second half.

“With government's stimulus policies kicking in and an easier comp, Alibaba’s revenue growth and margin should start to improve in the 2H,” Pei wrote in a research note. 

“Although the stock's growth thesis has been muted since 2021, we see positive earnings revisions and valuation improvement in the coming quarters.”

The Performance Breakdown: Customer management revenue, or CMR, represents the second-largest portion of Alibaba’s sales. Alibaba on Thursday reported a flat CMR of $10 billion for the quarter ended March 31.

“Management indicates that the June quarter will be more challenging as a result of COVID resurgence and lockdowns,” Pei said.

See Also: Why Alibaba Shares Are Rising Today

Alibaba shares have been under pressure lately amid increased regulatory scrutiny in China and were especially hit in the March quarter due to COVID-19 lockdowns.

The e-commerce giant did not provide an annual forecast citing the recent COVID-19 impact.

Alibaba’s March quarter revenue rose 9% to $32.2 billion, a rise of 9%, and said net loss widened over two folds to $2.89 billion year-on-year.

Price Action: Alibaba stock traded 3.3% lower at the time of writing on Friday.